CAIRO, AUG. 12 -- Iraqi President Saddam Hussein tonight said he would not withdraw his forces from Kuwait unless "all issues of occupation" in the Middle East are resolved, starting with an unconditional Israeli withdrawal from all occupied territories and a pullout of Syrian armed forces from Lebanon.

The Iraqi leader also proposed that as a step toward defusing the Persian Gulf crisis, a pan-Arab force under the United Nations flag be sent to replace the U.S. and Egyptian troops now deployed in Saudi Arabia to help defend it against possible Iraqi aggression.

By tying the current crisis to Middle East disputes that have defied decades of exhaustive negotiation, Saddam's self-proclaimed peace "initiative" appeared to offer little prospect of a breakthrough. It was viewed by many Arab and Western analysts as an attempt to involve Israel in the Persian Gulf crisis and marshal Arab masses against U.S. intervention in the Arabian peninsula.

An Israeli spokesman called Saddam's proposals "cheap propaganda," and White House spokesman Marlin Fitzwater said the United States "categorically rejects them." President Bush, asked in Kennebunkport, Maine, whether he saw anything positive in Saddam's proposals, said, "I didn't see anything to be pleasing in there at all. None. Nothing." There was no immediate response from Syria.

As Saddam spoke of conditions for peace, he also appeared to be girding for a long siege, evidently anticipating the effects of an international trade embargo and possible naval blockade of Iraq that were organized in response to Iraq's Aug. 2 invasion of Kuwait.

Earlier in the day, in a message he said was directed primarily at women, Saddam urged Iraqi citizens to halve their usual food consumption, stock food for no more than a week at a time and go without buying new clothes for a year.

"This way, we will strike at the Americans in the heart of their plots . . . and we will be able to defend our nation and honor," he said. While appearing to be preparing Iraqis for more economic hardship, Saddam promised them "massive wealth and a better future after victory."

The worldwide sanctions mandated by the U.N. Security Council appear to have already cut the export of Iraqi oil to a trickle. Iraq's pre-invasion oil exports of about 2.7 million barrels per day were mostly carried by pipelines through Saudi Arabia and Turkey, which have joined in the international effort to isolate Saddam. Secretary of State James A. Baker III said today that the United States would intercept any Iraqi ships carrying oil on the high seas.

Meanwhile, addressing the fate of foreigners stranded in Kuwait, the Iraqi News Agency quoted Saddam's presidential spokesman as saying authorities had been instructed to "facilitate the travel of the Arabs and foreign residents in Kuwait and other cities of southern Iraq," the term Iraq now uses to describe occupied Kuwait.

It was not clear whether foreigners could leave Kuwait, and the agency report made no mention of the tens of thousands of foreigners in Iraq, whose borders remained closed.

Iraq's foreign minister, Tariq Aziz, said earlier today that all foreigners in Iraq were safe in their homes or hotels. According to Aziz, Baghdad had taken "temporary precautionary measures" because of the crisis, but he denied that the foreigners were hostages.

In Washington, the State Department reacted skeptically when asked if the Iraqi News Agency's report signaled a change in Iraqi policy. "This is not automatically the same as saying roads and airports are open," a department spokesman said, "or that people will get permission to go. Facilitating travel might mean facilitating the paperwork. It might mean anything the Iraqis have in mind."

In the first official word of a Westerner hit by gunfire since Iraq invaded Kuwait, the British Foreign Office in London reported that a British businessman identified as Douglas Croskery of northeast England was shot and killed by Iraqi soldiers as he tried to cross the border from Kuwait into Saudi Arabia. A source close to his family said Croskery was killed Saturday.

Croskery was heading in a convoy of three cars toward the Kuwaiti-Saudi border when soldiers opened fire, according to the Kuwaiti ambassador to Britain, Ghazi Rayes. An estimated 40 Britons have escaped in recent days across Kuwait's desert border with Saudi Arabia.

Saddam, in his proposals read on Baghdad radio and television, demanded a freeze on all sanctions and economic blockades against Iraq and a restoration of all "economic, political and scientific dealings between Iraq and world countries."

The Iraqi leader said all "issues of occupation" in the region should be resolved before he would withdraw his troops from Kuwait, and that they should be handled in the order that they occurred, meaning his occupation of Kuwait would be the last to be settled.

He called for Israel to withdraw from the land -- the West Bank, Gaza Strip and Golan Heights -- it seized from Arab nations in the 1967 Middle East war, and for Syria, a longtime foe of Iraq, to pull out the troops -- estimated at about 40,000 -- that it has maintained in Lebanon for years.

Saddam also said all territorial disputes remaining from the eight-year Iran-Iraq war, which ended in 1988, must be resolved before he pulls his troops out of Kuwait.

Referring to last week's U.N. Security Council resolutions, he declared: "Because the spark of war, if started, will burn many and create great tragedies . . . I propose that all issues of occupation, or those projected as occupation, in the whole area should be resolved on the same basis and principles as put forward by the Security Council."

Outlining his suggestion for an all-Arab force to replace U.S. and Egyptian troops now in Saudi Arabia, Saddam said it could operate under the aegis of the U.N. Security Council, but Iraq and Saudi Arabia should decide which countries would contribute to it. He specifically excluded Egypt from the force, saying Egypt had been "used by America as a crutch in its conspiracy against the Arab nation."

"If America, its allies and small agents do not respond to our initiative, we will strongly resist, with the support of the good sons of the Arab nation and the great Iraqi people, the evil intentions and aggressive plots," Saddam declared.

He also warned, "The evil men will regret their act after they are driven out from the region with a curse trailing behind them," and called his proposal "a contribution on our part to create an atmosphere of real peace."

But he made clear he would resist giving up his claim to Kuwait, saying Kuwait had been carved out of Iraq by British colonialists and that "Iraq has never accepted the colonialist crime."

The official Iraqi News Agency said a group of Iraqi pilots had volunteered to stage suicide attacks on U.S. warships in the Persian Gulf.

The Associated Press, meanwhile, quoted diplomatic sources as saying two Iraqi pilots defected by flying their MiGs to a base in northern Saudi Arabia.

In Ankara, the Turkish National Assembly granted the government permission to declare war or send troops abroad -- but limited the authority to retaliation for an attack on Turkey. Asking for war powers, Prime Minister Yildirim Akbulut said, "We cannot remain indifferent when one of our neighbors {Iraq} is on a war footing."

Iraq's state-controlled media continued its bitter attacks on Egyptian President Hosni Mubarak, with one newspaper calling him "an obedient imperialist agent." The attacks came as Egypt's Defense Ministry confirmed that the first units of Egypt's 3,000-man contingent in the Arab force being deployed in Saudia Arabia alongside U.S. forces had arrived at Hafar Batin, 60 miles southwest of the Kuwaiti border.

Mubarak ordered the force to Saudi Arabia after a majority of Arab leaders attending a summit here Friday approved its formation. Western diplomats have said Syria and Morocco also will send troops to Saudi Arabia to defend the kingdom against possible Iraqi attack.

Mubarak today urged Saddam to respond to efforts to end the crisis peacefully, saying: "We have done all we can, and it is now President Saddam Hussein's turn to respond."

Speaking to reporters in Alexandria, Egypt, where he saw off Libyan leader Moammar Gadhafi and Algerian President Chadli Bendjedid, Mubarak sought to clarify remarks he made Saturday in which he said "there is no hope" of a peaceful solution. Today, Mubarak said he did not mean to say that war was inevitible. "I never said that war was the only solution. . . . We have to keep trying our best to solve this problem peacefully."

In Cairo, the Middle East News Agency reported that security police will step up protection of all embassies, government buildings, hotels and other potential targets of terrorism. "Egypt's security forces will respond with force to any attempts aimed at shaking Egypt's stability and security or trying to hit any Arab or foreign diplomatic missions or any foreigners living in Egypt," the news agency quoted a security official as saying.

U.S. Assistant Secretary of State John Kelly arrived in Cairo for a two-day visit after meeting in Saudi Arabia with Kuwait's exiled emir and Saudi officials.