MOSCOW, SEPT. 15 -- Soviet President Mikhail Gorbachev said today that Moscow would be willing to discuss Iraq's grievances against the ousted Kuwaiti leadership, but only after Iraqi President Saddam Hussein withdraws his troops from Kuwait and returns sovereignty to the emirate, according to Italian Foreign Minister Gianni De Michelis.

De Michelis, who met here today with Gorbachev, told reporters afterward, "If Iraq does this, then {Gorbachev} believes that it would be possible at a diplomatic level to discuss the issues raised by Iraq prior to the invasion."

Before the Aug. 2 invasion, Saddam accused Kuwait of overproducing oil, thereby holding down its price. He also disputed Kuwait's territorial claims to an oilfield and two islands, and said Kuwait owed Iraq billions of dollars in compensation.

According to De Michelis, Moscow is also prepared to reinstate normal diplomatic ties with Israel, if Jerusalem signals its willingness to take part in an international conference on the Israeli-occupied territories. Earlier, the Soviet side had insisted that such talks open before it would recognize Israel.

Moscow broke relations with Israel during the 1967 Arab-Israeli war. Gorbachev met Friday with two Israeli cabinet ministers, the highest-level meeting between the two countries since that time.

De Michelis said he spoke with Gorbachev about the possibility of applying some sort of sanctions against countries that attempt to break the embargo. The United States and France have encouraged such a move, but De Michelis gave no indication of where Gorbachev stood on this issue.

Soviet Defense Minister Dmitri Yazov, meanwhile, said in an interview with the newspaper Moskovskaya Pravda that Iraqi military personnel no longer would be invited to train in the Soviet Union. He said 178 Iraqis are at various training centers but they would not all be sent home immediately.

The Latvian parliament issued an official protest against the presence of Iraqi "aggressors" -- cadets training at one of the republic's naval training centers in Riga. Yazov said 77 cadets in the Baltic republic would return to Iraq at the end of November.

Andrejs Krastins, vice chairman of the Latvian parliament, said the republic should cut off water, electricity and food supplies to the Riga naval base if the Iraqis are not sent home immediately.

De Michaelis also announced that Italy would give the Soviet Union $2.72 billion in credits, and said he had discussed fuel, electricity and telecommunications agreements between the two countries.