PARIS, JULY 25 -- Iraq appeared to be gaining ground today in its military-diplomatic push for higher oil prices as OPEC ministers gathered in Geneva for an unusually tense meeting of the oil cartel.

The OPEC ministers will begin their formal meeting Thursday under the shadow of an Iraqi threat earlier this week to use force against Kuwait, a fellow OPEC member. This military situation appeared to ease somewhat today, as Egyptian President Hosni Mubarak announced that Iraq and Kuwait would begin direct talks in Saudi Arabia this weekend in an attempt to settle their differences over boundaries and oil policies.

Mubarak said he had assurances from Iraqi President Saddam Hussein that he had "no intention" of invading Iraq's tiny southern neighbor. {Details on Page A34.}

Another sign that the military crisis may be easing came as the Iraqi president sent an urgent message to President Bush through the U.S. ambassador in Baghdad pledging that "nothing will happen" on the military front while this weekend's mediation efforts are taking place. {Details on Page A34.}

Cash-starved Iraq appears likely to get what it has wanted from a crisis it has largely stage-managed -- higher oil prices and increased revenues. "We will raise the reference price" for a barrel of oil, said Saudi Arabia's Oil Minister Hisham Nazer after a preliminary meeting of the cartel tonight. He did not mention a specific figure.

Iraq has massed an estimated 30,000 troops on its border with Kuwait to back up its demand for changes in Kuwaiti oil policy. At the same time, Baghdad has been urging the 13-member OPEC group to boost its target price to $25 a barrel from the current $18 level. The Saudi minister's comment made it more likely that the cartel will agree on some increase in the target price and on production cuts to push prices toward the target level.

Kuwaiti Oil Minister Rashid Amiry insisted that any price rise must be "reasonable."

Other OPEC nations, including Iran, have proposed a compromise price of $20, fearing that the market is not strong enough for a $7 rise, as suggested by Iraq. Iranian Oil Minister Gholamreza Aqazadeh told reporters, "In my understanding, everyone is agreed on 20, but maybe we will agree to more than 20."

The cartel's price-monitoring panel, comprising eight of the 13 member countries, was assigned to review recent evolutions of the market in preparation for Thursday's full ministerial meeting.

The regular mid-year meeting, which opens formally on Thursday, marks the first time in the 30-year history of the Organization of Petroleum Exporting Countries that one of the member countries is brandishing the possibility of military action against another member to protect its interests in cartel decisions.

"Force has never been used within OPEC," said David T. Mizrahi, editor of MidEast Report, a New York newsletter that covers the industry. "Now for the first time we're seeing a military threat for the purpose of forcing other members to submit to a diktat." Because of this week's events, Mizrahi forecast that "Iraq will be the leader of OPEC by the year 2000."

In addition to injecting a dangerous new element into the OPEC struggle to control prices and production levels, Iraq's saber rattling has underlined the difficulty faced by Persian Gulf neighbors and Western allies alike in dealing with President Saddam Hussein's big-stick leadership style in Baghdad and the gulf region.

Saddam Hussein's quarrel with the Kuwaiti ruling family and the UAE's sheiks over production quotas has echoed long-standing complaints from other OPEC members, including Saudi Arabia and Iran.

In addition to massing troops along the Kuwaiti border, Saddam Hussein's government has intensified the hostility by accusing Kuwait of stealing oil by drilling illicitly into a deep reserve that lies mostly under Iraqi soil but extends into Kuwait.

Middle East analysts said the high visibility of the Iraqi troop movements indicated they probably were designed more as a show of force than preparation for an invasion. Nevertheless, the threat of violence has raised tensions in the gulf to the highest point since Iran and Iraq agreed on a cease-fire two years ago, after a decade of grinding warfare.

The Bush administration, in what was interpreted as a warning to Saddam Hussein, announced Tuesday that it is holding a short-notice naval exercise with the United Arab Emirates and the U.S. Navy's Joint Task Force Middle East. The six-ship U.S. naval force has been sailing the gulf regularly since 1987, when Kuwaiti oil tankers were reflagged to come under U.S. protection from threats by Iran amid the gulf war.

That operation was widely understood as support for Iraq. But with circumstances now reversed, in the kind of turnabout for which the Middle East is notorious, Saddam Hussein's government has denounced the United States as the leader of a plot to weaken the Iraqi economy by undermining oil prices in collusion with Kuwait.

Without a shot having been fired, oil analysts pointed out, Saddam Hussein already has achieved part of his goal. The crisis atmosphere has contributed to a rise in oil prices in recent days as traders hedge against any disruptions in supplies.

Prices had been moving up in any case, they said, in part because of uncertainty in the Soviet Union. This reversed a long slump in prices this spring, caused by excess production attributed in large part to Kuwait and the UAE.

West Texas Intermediate crude moved from $17.50 per barrel on June 1 to $19.70 by July 20, shortly after the current crisis erupted. The OPEC average has risen from $14 a 42-gallon barrel early in the year to approach the target $18.

Saddam Hussein set off the new chapter in OPEC price-setting by vowing to do "something effective" if Kuwait and the UAE fail to abide by their quotas. The two nations had agreed earlier to stick by previous quotas of 1.5 million barrels a day each, but Saddam Hussein expressed doubt their word was good. In recent months, he recalled, the two producers had pumped up to one-third more than their quotas.

Iraq has estimated soft prices over the last year cost it $14 billion in lost revenues at a time when Saddam Hussein is eager to rebuild after the debilitating war with Iran. The long conflict, which drained the country's resources and prevented full oil production for a decade, contributed to a debt to Western countries estimated at $40 billion.

In addition, financial analysts have estimated Iraq contracted more than $30 billion in debts to Saudi Arabia, Kuwait and the UAE to pay for the war. Saddam Hussein has demanded that these debts be forgiven on grounds Iraq fought the conflict as a champion of the Arab world against threats from Iran's militant brand of Shiite fundamentalism and Persian nationalism. But even if they are erased, the Saddam Hussein government remains seriously short of cash despite its vast oil reserves, the second largest in the world after Saudi Arabia.