AMMAN, JORDAN, SEPT. 10 -- Iraqi President Saddam Hussein, probing for holes in the U.N. trade embargo against his country, tonight offered free oil to any Third World nation that can arrange its own shipping.

Iraqi Foreign Minister Tariq Aziz, working on another possible avenue around the embargo, completed a visit to Tehran today with an announcement that the two countries have decided to resume diplomatic relations after a 10-year break. Iraq may hope to obtain food and other supplies through Iran.

Saddam, in a statement read by an Iraqi television announcer, depicted his free-oil proposal as a gesture of solidarity with poor countries hit hard by soaring oil prices as a result of the Persian Gulf crisis. He said Third World countries that send ships to pick up Iraqi oil under his offer would not be violating the U.N. Security Council's trade ban because the oil is free.

The offer was met largely with disbelief and mockery from Third World representatives meeting in Paris at a U.N. conference on the least developed countries, Reuter reported. "How do you get there? The Americans are there. How do you bring the oil back through a blockade?" a Haitian diplomat said. An African asked, "Did Saddam Hussein not know before that we needed oil?" Another said, "Asking people to collect oil through a blockade is like telling them, 'You'll get it after you're dead.' "

In Washington, White House spokesman Marlin Fitzwater described the moves by Saddam to offer free oil and to solidify relations with Iran as "desperation attempts . . . {which} indicate that the pressure is pinching them."

Fitzwater said the Bush administration expects Iran to abide by the sanctions, as it has pledged, and said the sanctions cover export of Iraq's oil, even if it is free. "It means nothing," Fitzwater said of the offer of free oil. "The sanctions cover the oil at any cost."

In Cairo, meanwhile, representatives of 12 Arab League member states voted tonight to move the organization's headquarters from Tunis back to the Egyptian capital by Oct. 31.

The move, taken at an emergency meeting that was boycotted by Iraq and eight of its allies, further deepened the rift in the Arab League caused by the gulf crisis. Egypt has been in the forefront of those Arab nations that have condemned Iraq's invasion of Kuwait.

Saddam's offer of free oil appeared to be a bid to mobilize the world's "have-nots," a tactic he has used with limited success in the Arab world. "We are brothers and we share the same fate," he asserted. "That is why we declare our readiness to supply those countries in need with Iraqi oil free of charge.

"When oil became scarce we realized that you would not get any oil except what is a surplus from the developed countries, that is, Third World countries would get only what is a surplus of the need of the industrial world -- the United States and Zionism and pro-colonialist countries," he said.

The Iraqi leader's offer appeared likely to strike a responsive chord in some Third World capitals. Since Iraq's invasion of Kuwait on Aug. 2, oil prices have climbed by 50 percent, to about $30 a barrel.

As in past oil shocks, this has hit particularly hard in the fragile and currency-poor Third World economies.

But the offer nevertheless seemed unlikely to attract any takers in the near future. The United States and allied naval forces have vowed to prevent shipping in violation of the embargo from leaving or entering Iraqi or Kuwaiti ports.

Saddam's argument that shipping free oil would not violate the embargo was unlikely to be heeded in the Western capitals whose ships have mounted what amounts to an undeclared blockade.

The Bush administration also has arranged a cutoff of Iraqi pipeline outlets through Saudi Arabia and Turkey and deployed forces to prevent any transshipment of oil or merchandise through the Jordanian port of Aqaba. It was apparently in recognition of these measures that Saddam suggested Third World countries that want to pick up his free oil would have to make their own shipping arrangements.

"It is difficult for us to transport to them by our tankers," he said. "They should arrange for the transport themselves."

The announcement that Iran and Iraq are resuming diplomatic relations formally sealed the end of the war they fought from 1980 until a U.N.-mediated cease-fire in 1988. The move was announced after what Aziz described as two days of "positive, serious, practical and friendly" talks in the Iranian capital.

There was no word, however, that Iran was willing to shift its stand on the invasion of Kuwait, which was believed to be one of the chief aims of Aziz's conciliatory visit. Despite its long history of conflict with the United States and other Western governments, Tehran has condemned the invasion and annexation and announced readiness to abide by the U.N. trade embargo.

"The Islamic Republic of Iran, keeping to its position toward the region and Kuwait, insists on the need for a comprehensive peace and implementation of agreements between the two countries," said a statement on Tehran radio attributed to President Ali Akbar Hashemi Rafsanjani.

Iran's 750-mile border with Iraq would be convenient for embargo-busting trade if Tehran decided to help Baghdad, observers have pointed out. In addition, ending hostilities with Iran freed a large contingent of Iraqi troops along the border for redeployment in Kuwait or southern Iraq to defend against any attack from U.S. and allied troops in Saudi Arabia.

The two ministers also announced that a joint committee has been formed to supervise repatriation of war prisoners. More than 50,000 prisoners from both sides already have returned home since Saddam announced last month that he would accept Iranian terms for a formal end to the war.

Ironically, the offer for free oil to the Third World applied to four countries -- India, Pakistan, Sri Lanka and Bangladesh -- whose citizens Iraq had subjected to harsh treatment last week in an effort to get them to break the embargo.

Iraq told the four South Asian countries, which have large contingents of workers in Iraq, that it would no longer supply the workers with food as outlined in the contracts that govern their presence in Iraq. To feed their stranded nationals, the South Asian governments would have to ship food into Iraq, Baghdad said, arguing that such humanitarian imports were permitted under the U.N. embargo.

In response, India applied for U.N. authorization to send food but was refused.

Similarly, Pakistan announced Sunday that it plans to send 30 tons of food to Jordan in hopes it could be sent on to Iraq. A spokesman in Islamabad said the government has contacted Washington and other capitals to seek authorization under terms of the U.N. embargo.

The Arab League's headquarters, originally in Cairo, were moved to Tunis after Egypt was expelled from the group because of its peace treaty with Israel in 1979. This year, the member states informally agreed to move the headquarters back to Cairo following Egypt's readmittance.

But after Egypt harshly criticized Iraq's invasion of Kuwait, Iraq said Egypt was not entitled to host the league. Tonight's meeting was aimed at "removing any chance that Iraq or Tunisia could sabotage the move to Cairo," an Egyptian official said.

Tunisia is among the Arab countries that have refused to condemn the Iraqi aggression.

Besides Egypt and Syria, the countries that voted to move the headquarters back to Cairo were: Saudi Arabia, Kuwait, the United Arab Emirates, Somalia, Qatar, Bahrain, Morocco, Oman, Lebanon, Djibouti. The same 12 condemned Iraq's invasion of Kuwait on Aug. 10 and voted to send an Arab deterrent force to the gulf to help protect Saudi Arabia from Iraq.

Staff writer Ann Devroy in Washington and correspondent Caryle Murphy in Cairo contributed to this report.