Iran has resumed shipments of cut-price oil to Syria in an apparent effort to block Arab-backed reconciliation between the virtually bankrupt Damascus government and Iraq, their common enemy, according to Arab and western diplomats.
Syrian sources cautioned, however, that President Hafez Assad has yet to veto reconciliation with Iraq, despite the last-minute cancellation Friday of an announced meeting between the Iraqi and Syrian foreign ministers.
Warmer relations between Syria and Iraq could alter the course of the 5 1/2-year-old war between Iran and Iraq, and would help pave the way for an Arab summit to coordinate how the Arab world deals with Israel.
In the continuing absence of any official explanation from Iraq and Syria for the cancellation, western and Arab diplomats and analysts speculated that Damascus may be using the new Iranian oil deal to extract more cash from Saudi Arabia and other Arab states as its price for improving relations with Iraq. Syrian sources said that Iran's renewed oil deliveries were "not enough in themselves" to bury Arab reconciliation efforts.
The sources implied that Damascus still needed massive injections of cash to shore up its moribund economy -- damaged by the Iran-Iraq hostilities and the loss of gulf oil-generated revenues -- which only Saudi Arabia and other Arab oil producers could provide.
Still unclear was whether King Hussein of Jordan, the architect of the aborted foreign ministers meeting, would resume active mediation to try to salvage his initiative.
The normally wary monarch, who was expected to return home soon after extended visits to France, the United States and Britain, appeared so confident about the progress last week that in an interview with The Washington Post in Washington he uncharacteristically disclosed the date of the foreign ministers' meeting in advance.
Diplomats and analysts here expected the king to bide his time in hopes of forcing a period of reflection on Assad, Iraqi President Saddam Hussein and other Arab leaders involved in his effort to wean away Iran's only major Arab ally in the nearly six-year Gulf war.
Although Jordanian officials described the setback as a postponement, diplomats reached by telephone in Damascus said public opinion was that the Friday cancellation marked the end of the reconciliation effort.
Piecing together information from various Arab and European capitals, analysts credited Iran with moving quickly to play on deep-seated differences between Iraq and Syria to frustrate what many Arabs had hoped would be the beginning of a reconciliation between the two.
In a Tehran news conference upon his return from Syria and Lebanon last week, Iranian Deputy Foreign Minister Mohamed Ali Besharati indirectly confirmed the resumption of oil shipments interrupted because of an estimated $2 billion in unpaid Syrian bills.
Arab sources said that Besharati's visit to Damascus coincided with the first Iranian oil tanker delivery -- amounting to 500,000 barrels -- to Syria in more than six months. Western oil industry sources said even more crude was involved.
Under the proposed reconciliation formula, these sources said, Iraq was to have supplied Syria, free of charge, with between 150,000 to 180,000 barrels a day in repayment of crude that Saudi Arabia and Kuwait provided Baghdad since the Gulf war began in 1980. The crude now is worth about $11 a barrel.
That was only part of the inducement offered Damascus to reopen the 600,000 barrel-a-day pipeline -- closed four years ago -- that leads from Iraqi oilfields, across Syria to the Mediterranean.
Diplomatic sources also speculated that Saudi Arabia would add to the estimated $600 million to $700 million in grants it provides Syria annually. Kuwait and other Arab oil producers were expected to resume similar, if smaller, contributions, interrupted to protest Assad's support for Iran.
Last Friday's meeting apparently foundered on Syria's desire either to limit reconciliation to purely economic questions or expand it to encompass full union with Iraq.
An earlier plan for unifying the two countries' rival branches of the Arab Baath Socialist Party failed after a short-lived peace reconciliation in 1978, with Saddam Hussein accusing Assad of having used the scheme to plot his overthrow. Several Iraqi ministers at the time were arrested and executed for their alleged part in the plot.
Syria also insisted that its de facto alliance with Iran remain intact and wanted to limit any conversations to improving bilateral relations with Iraq. Baghdad demanded that Assad deal squarely with the Gulf war and Syria's relations with Tehran.
Both Syrian and Iraqi sources confirmed that their governments also had failed to bridge important procedural gaps.
Assad, for example, wanted the foreign ministers to arrange for a private meeting between himself and Saddam Hussein. But the wary Iraqis wanted any such summit meeting held in Jordan with Arab League Secretary General Chedli Klibi and either King Hussein or King Fahd of Saudi Arabia in attendance.
Syrian sources stressed that Damascus was justified in trying to straddle seemingly diametrically opposed Arab and Iranian demands. They claimed that Saudi Arabia, for example, understood the importance of maintaining good relations between Damascus and Tehran as an avenue to trying to end the Gulf fighting.
Peyman Pejman of the Washington Post Foreign Service contributed to this report from Washington.