Fighting raged today over the last Iranian stronghold on the east side of the Shatt al-Arab waterway as Iraq's foreign minister warned that world peace will be threatened if the United States trades arms to Iran for the American hostages.
The warning by Iraqi Foreign Minister Saadoun Hammadi came amid increasing concern among official and diplomatic sources here that the Carter administration might try an election eve tilt in favor of Iran in its war with Iraq in an effort to win the freedom of the 52 hostages held for almost a year.
The Carter administration appears here to be facing a dilemma just before the U.S. election, as for the first time Tehran looks eager to solve the 356-day-old hostage issue.
Yet Iran's price for the hostages as viewed from here may be too high. If, for example, Iran demands military aid or armaments and the United States sends them, it could not only alienate American friends in the region, such as Saudi Arabia, but might also be viewed at home as a cheap political trick by President Carter to win votes.
The Saudi reaction is especially critical since the government there has agreed to step up oil production to meet the loss to the world supply caused by the 34-day-old-war between Iraq and Iran.
The Carter administration sent four sophisticated radar planes to Saudi Arabia last month to protect the Persian Gulf oil fields against an Iranian desperation attack.
On the fighting front today, Tehran radio said its forces had regained a large number of positions in the port city of Khorramshahr, which Iraq claimed yesterday to have finally captured after more than four weeks of fighting.
Most diplomats here believe the Iraqi claim, although it is impossible to verify since Baghdad officials refuse to allow foreigners to visit the city.
According to unofficial but reliable sources here, the captured city is under heavy air attack by the Iranians. Tehran radio said, "Our military brothers since early today launched air operations against enemy positions in Khorramshahr and surrounding areas and inflicted heavy casualties on them."
Meanwhile, in an interview with the official newspaper of Iraq's ruling Baath party, Al Thawra, Hammadi said recent statements by Carter and Secretary of State Edmund Muskie have caused him to doubt that the United States is remaining neutral in the gulf war.
He said he was especially concerned by the U.S. warning to Iraq against the dismemberment of Iran, and added that it appears the United States was prepared "to build serious friendly relations" with the Tehran government of Ayatollah Ruhollah Khomeini.
"If the hostage crisis ends," the Iraqi foreign minister said, "the United States would look at the new Iranian regime as one it can come to an understanding with."
On the other hand, he said, the United States is unable to forge strong ties with Iraq because of Baghdad's opposition to the return of American influence in the Persian Gulf.
Nonaligned diplomats here considered the Carter administration warning against dismemberment of Iran especially strong since Iraq has said it does not want to take Iranian territory.
Hammadi insisted that Iraq's aim was merely "to defend its legal rights and safety of its lands and territories," not to take Iranian land.
That would mean gaining control of the Shatt, the waterway leading into the Persian Gulf, up to its east bank, diplomats said, with the secondary goal of claiming three small islands near the Strait of Hormuz in the southern gulf to invest the war with a pan-Arabic patina.
Nonetheless, Iraqi newspapers have become increasingly filled in recent days with articles on "Arabestan" -- Iraq's nationalistic name for Iran's oil rich Khuzestan Province, which is now under Iraqi attack. According to these articles, the land is historically Arab and should not be part of Persian Iran.
The question arises, then, whether Iraq is looking toward annexing the richest part of Iran, or whether it would like to set up an independent, Arabic state in Khuzestan.
Yet there have been no signs that the largely Arabic-speaking population of the vast desert area of Khuszestan, which contains most of Iran's oil wealth, has supported Iraqi troops that moved in there.
Meanwhile, Iraqi President Saddam Hussein, in a cable to Libyan leader Muammar Qaddafi, who has taken Iran's side in the fighting, declared, "Our martyrs will go to paradise but your 'friends' and those who support their cause will go to hell."
On the fighting front, there was no question that the four-week-old battle for Abadan intensified today. Iran acknowledged that largely residential sections of that city had been destroyed by Iraqi artillery and aircraft, but Iran said its withering rocket fire had stalled Iraqi efforts to surround the city.