Iraqi President Saddam Hussein declared yesterday that the 1975 Algiers agreement between his country and Iran settling their longstanding border dispute is "null and void" and that his country will now seek to recover the disputed territory by force.

In a televised speech before the Iraqi National Assembly, Saddam Hussein charged that Iran had "rejected the agreement to withdraw from Iraq frontier territories, thus obliging Iraq to recover them by force." f

Saddam Hussein's words indicated a major escalation of tension between the two countries.

At the same time, Iranian President Abol Hassan Bani-Sadr charged in an interview with a French news agency in Tehran that Iraq is preparing a "massive attack" against Iran's oil-rich Khuzestan Province.

"For the moment, it is still a frontier conflict, a war of attrition, with operations limited to the Ilam and Kermanshahan provinces. But it is highly possible that it could explode into a real war," Bani-Sadr told Agence France-Presse.

President Bani-Sadr, who has just concluded a three-day trip to the border, said he had received reports a month ago of the Iraqi "plan of aggression."

Iraq has become increasingly assertive on the border issue over the last year, apparently taking advantage of Iran's weakened position. The Iranian armed forces are generally regarded to be in a state of disarray following 18 months of revolution, purges and a total break with the United States, which provided the bulk of Iran's arms prior to the shah's fall in February 1979.

Saddam Hussein's statement followed several weeks of fighting between Iranian and Iraqi forces at various points along their common border, including the key, disputed Shatt-al-Arab estuary leading into the Persian Gulf and separating the two countries in the south.

Both countries lay claim to the waterway but, under the Algiers agreement, the two agreed to fix the border down the center. Saddam Hussein said in his speech that the Shatt "should return to its former status, namely Iraqi and Arab . . . and be under total Iraqi sovereignty."

The Algiers accord, signed by Saddam Hussein and the late, deposed shah, had ended almost a decade of intermittent hostilities between the two countries, even though Iran apparently never implemented it completely. The two fought a border war in 1974-75, leading to the Algiers agreement.

Monday, Iraqi Vice President Ibrahim Izzat told a news conference in Rome that the shah had failed to turn over to Iraq the Zin-al-Kaus area near the mouth of the Tigris and Euphrates rivers. The territory, 300 miles long and nine mines wide, is of considerable importance to Iraq because of its location close to the main Iraqi oil shipping routes, he said.

Izzat said the Iraqi armed forces had launched a military operation last Saturday to seize control of this area. On Monday, Iraq claimed to have "liberated" 80 square miles of territory belonging to it under the terms of the Algiers accord.

In his interview with Agence France-Presse, President Bani-Sadr acknowledged that Iran had not completely fulfilled the terms of the Algiers agreement and blamed it on the shah. "Who signed that agreement? Even the shah's regime did not apply it, and furthermore, from the start Iraq has adopted a hostile attitude toward the Islamic revolution," Bani-Sadr was quoted as saying.

This was believed to be the first time any Iranian leader, before or after the shah's fall, had publicly admitted a failure to carry out the accord.

Asked about the likelihood of a new negotiated settlement of the border dispute with Iraq, the Iranian president said he thought it was only a "pretext" adding "I do not think it can be discussed. If Iraq is sincere, it has to prove it by halting its armed aggression. For us, there is no problem."

Bani-Sadr warned Iraq not to pursue its aggression, saying the whole Iranian people was ready to defend the country and that an Iraqi attack would be "suicide."

The exact status of the situation along the two countries' border remains confused, with both sides reporting almost daily artillery, air and ground clashes as well as numerous casualties. A number of Iraqi Soviet-supplied Migs and Iranian American-made fighter jets have been reportedly shot down.