DOHA, QATAR, DEC. 25 -- Persian Gulf Arab leaders demanded today that Iraq unconditionally withdraw from Kuwait ahead of the United Nations' deadline of Jan. 15 or face war.

Abdullah Bishara, secretary general of the six-nation Gulf Cooperation Council (GCC), said the council also demanded that Iraq "pay compensation for all damage caused" by its Aug. 2 invasion and occupation of Kuwait.

GCC members Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Oman and Kuwait pump nearly a quarter of the world's oil. Saudi Arabia is providing the main bases from which U.S.-led multinational forces in the region could attack Iraq. The United Nations has called on Iraq to withdraw by Jan. 15, after which the multinational force is authorized to use force.

Bishara also said GCC member states would make greater efforts to strengthen their own armed forces. Council officials said earlier that talks were being held on a new security structure for the region that would include Iran, which was at odds with the group during the eight-year Iran-Iraq war.

"The GCC welcomes Iran's wish to improve ties," Bishara said, reading a communique. Iran has diplomatic relations with all council members except Saudi Arabia, which cut ties in 1988 amid disputes over Iranian participation in the annual Moslem pilgrimage to Mecca.

The communique also called for convening an international peace conference on the Israeli-Palestinian conflict "to be attended by all parties concerned, including the state of Palestine."