BAGHDAD, IRAQ, DEC. 29 -- The prospects for a negotiated settlement of the Persian Gulf crisis remain bleak, diplomatic sources here say, and preparations for war are evident in the Iraqi capital.

Despite the lack of any visible progress in resolving the crisis through talks between Iraq and its adversaries, there is increasing speculation here that Iraqi President Saddam Hussein is looking for face-saving ways to extricate himself from the conflict.

Rumors abound among the Baghdad diplomatic corps that a "spontaneous" demonstration is being planned for around Jan. 10 -- with the theme of "Saddam, yes; Kuwait, no" -- in which thousands of Iraqi civilians would march in the streets appealing for a partial or complete withdrawal from Kuwait.

The rumors have become so pervasive that Iraq's ruling Revolutionary Command Council issued a formal denial today that any withdrawal is being considered or any demonstration is planned. The statement reiterated Iraq's commitment to keep Kuwait as its 19th province.

Iraq faces a U.N.-imposed deadline of Jan. 15 to withdraw from Kuwait or face an attack by U.S.-led multinational forces massed in northern Saudi Arabia.

Diplomats here believe that Saddam is planning some kind of eleventh-hour ploy to delay U.S. military action, either by beginning a deliberately slow withdrawal from Kuwait or by embracing the idea of a negotiated settlement through direct talks with Washington.

President Bush proposed on Dec. 1 that Secretary of State James A. Baker III visit Baghdad for talks on the crisis and that Iraqi Foreign Minister Tariq Aziz make a similar trip to Washington. That effort foundered, however, when the two sides failed to agree on a timetable -- with the Bush administration rejecting Iraq's proposal of a Jan. 12 meeting with Baker as too close to the U.N. deadline.

One diplomat here suggested that Bush had erred by making the proposal for talks only one day after the U.N. Security Council had voted to set Jan. 15 as the deadline. "Perhaps Saddam saw this as a sign of weakness," the diplomat said. "They should have let {Saddam} . . . sweat for a while."

Now Saddam is expected to use every delaying tactic at his disposal in order to avert war but buy time while he tightens his grip on Kuwait. He could slowly begin pulling out forces so as to make it politically difficult for the United States to attack, analysts say, or he could suddenly embrace the idea of negotiations, even though he has repeatedly said the occupation of Kuwait is irreversible. The United States and Saudi Arabia are demanding a full, unconditional Iraqi withdrawal from Kuwait.

As if to underscore the diplomatic stalemate, Iraqi Information Minister Latif Nassif Jassim said Friday that there has been no secret discussion between Iraq and the United Sates regarding a possible rescheduling of the Aziz-Baker visits.

"Right now there is not really any use in having talks," one diplomat said. "Neither side has anything to negotiate." Another diplomat was equally pessimistic about the prospect for negotiations. "What is known up until this moment, either via Saddam's media interviews or by his talks with foreign officials, is that there is no change in his position."

The deadlock in direct U.S.-Iraqi talks is mirrored by the stalled effort of Algerian President Chadli Bendjedid to arrange a dialogue between Saddam and Saudi Arabia's King Fahd. A third initiative has been undertaken by the movement of nonaligned nations, whose representative, Yugoslav Foreign Minister Budimir Loncar, is currently in Baghdad for talks with Aziz.

The visit by Loncar was originally planned for October but was delayed because Iraq viewed it as the least viable avenue for a negotiated solution, diplomats said. But Saddam assented to the Yugoslav's visit after it became apparent that the other two initiatives were getting nowhere.

Still, "you don't feel any kind of hope," a Moslem diplomat said. "Time is running very short."

As pessimism grows over the failure of diplomatic efforts, preparations for war are apparent here, as elsewhere in the region. Diplomats have reported an Iraqi troop buildup in the north, along the border with Turkey, a U.S. ally and NATO member. NATO is expected to fulfill a request by Turkey that it station air forces near the border in case a war over Kuwait should spark fighting there.

In Iraq, at least four evacuation drills have been held in major metropolitan centers during the past two weeks. The most recent occurred Friday in the Babaeen district, about 20 miles south of Baghdad. The official Iraqi newspaper Qaddissiyah said the evacuation was "designed to deepen the vigilance of the people."

At the Baghdad railroad yard today, freight cars were being loaded with artillery pieces, anti-aircraft guns and other military equipment.

In an interview published today in Iraqi newspapers, Saddam repeated that the United States would suffer defeat if it engaged Iraq in a war. "Certainly the American army . . . would face defeat," he said in an interview on Mexican television, "not because it is not brave, but because it is not on the side of justice."

Reuter reported the following gulf-related developments:

Poland sent a medical team and two ships to the Persian Gulf today to assist multinational forces facing Iraq, the official news agency PAP said. The hospital ship Wodnik and rescue vessel Piast sailed from Gdynia with a crew of 140, including a 17-man medical team.

PAP said the Wodnik had three operating wards and could treat up to 150 casualties. It will take the ships three weeks to reach the gulf.

France shipped 60 anti-tank helicopters to Saudi Arabia as part of reinforcements announced this month that are intended to bring French forces in the country to 9,500 troops by Jan. 15. French military chief of staff Gen. Maurice Schmitt said French forces in the region would likely be placed under U.S. operational control in case of war, if President Francois Mitterrand decided to engage them.

The British Defense Ministry confirmed in London that classified documents, which press reports said may have discussed the British deployment in the gulf, were stolen from the trunk of a ministry car 12 days ago. A London newspaper said the documents, in a briefcase, were found on a trash pile by a passerby soon afterward.

The Daily Mail said the papers had been used by the British forces' commander in the gulf in briefing Prime Minister John Major on the British deployment. Newspapers said the car's driver had stopped and left it unattended while driving from London to a Royal Air Force headquarters.