BAGHDAD, IRAQ, DEC. 10 -- Despite Iraq's effort to comply with a principal United Nations demand by releasing foreign detainees, there has been no perceivable relaxation of tension here between the United States and Iraq.

While the U.S. Embassy has complimented the Iraqi government over the last two days on its efforts to facilitate the departures, there appears to be no positive diplomatic follow-through, according to U.S. and other diplomats and officials with contacts in the Iraqi government.

Today, Information Minister Latif Jassim dismissed speculation that release of the foreigners could be followed by Iraqi withdrawal from Kuwait as "dreams and wishful thinking."

"Kuwait is Iraqi, whether in the past, present or future," said Jassim, in a statement carried by the official Iraqi News Agency. "We will not compromise one iota on Kuwaiti territory."

President Bush said two days after Iraqi President Saddam Hussein's decision last Thursday to release all foreigners that "I don't feel we are closer to a solution" -- which he has insisted must include Iraqi withdrawal from all of Kuwait. Further U.S. statements today were similarly uncompromising.

Some observers here contend that diplomacy between the two countries is being conducted on a fairly superficial level. Each day, they note, U.S. charge d'affaires Joseph Wilson meets or talks by phone with Deputy Foreign Minister Nizar Hamdoon, who is a former ambassador to the United States.

These observers say the contacts do not occur at higher levels and that the subjects of the talks are still very basic.

"It's public diplomacy. Nothing is going on in private," said a source close to the Iraqis. "There is a feeling here that Saddam's decision {to release the foreigners} did not satisfy the U.S. administration."

The Iraqi official press and some Iraqi officials convey the sense that they expected Saddam's initiative to satisfy United Nations demands even though it addressed only one of them, the freeing of foreigners, and made no bow to the calls for return of Kuwait to its former status.

Each day since the decision, newspapers have been filled with congratulatory comments regarding the decision from the leaders of Arab, Western and other nations.

"Worldwide welcome to Iraqi move on foreign nationals" was a banner headline Saturday. Today's first page of the English-language Baghdad Observer, published by the Ministry of Information, noted that Bahraini and Pakistani leaders have praised the decision as a step toward a peaceful settlement of the Persian Gulf crisis.

But the United States and Iraq have yet to decide even the dates for the meetings of Secretary of State James A. Baker III and Iraqi Foreign Minister Tariq Aziz with Presidents Saddam and Bush, respectively, although the conversations between Wilson and Hamdoon have intensified in the past two days.

Iraq, for its part, has insisted that any definitive settlement must address the Palestinian issue, a stance Washington has rejected. Naji Hadithi, spokesman for the Iraqi information and cultural ministries, said in an interview that Iraq would not be satisfied with a tacit U.S. approval of the various U.N. resolutions dealing with the treatment of Palestinians in occupied Israeli territory, or a Middle East conference dealing with the subject sometime in the "appropriate" future, as alluded to by Bush.

Instead, Hadithi said, "We hope there is a real change, because there is no trust" by Arabs of U.S. intentions in this area.

"Nobody believes" that slight shifts of "tones" in the U.S. position on the Palestinian question have any significant meaning toward a solution that would satisfy the Arab world, the spokesman said.

In perhaps a small sign that the Western community is not hopeful that there will be a peaceful resolution here, one ambassador has scheduled his home leave for Jan. 15 -- the date by which the U.N. Security Council called for compliance with resolutions demanding Iraqi withdrawal.

Iraqi Trade Minister Mohammed Mehdi Saleh said at a press conference today that U.N. economic sanctions have been responsible for the deaths of 1,400 infants because of the shortage of imported baby formula. The assertion, similar to others made in the past, was roundly denied by Western diplomats.

Saleh said Iraq has plenty of fresh fruit and vegetables, which appear in abundance in Baghdad shops, but that sanctions have hurt its available stocks of such staples as wheat, barley and rice.

He said the government, through rationing of these commodities, aims to reduce consumption of them by 50 percent while increasing domestic harvests of the crops.

The economic sanctions have lifted "the will of the people to fight against the sanctions by increasing their production of agriculture and industry," said Saleh. "By the end of the sanctions, the world economy will lose the Iraqi market," he said, because it will be self-sufficient.