BAGHDAD, IRAQ, JAN. 4 -- Although Iraq today accepted President Bush's proposal for U.S.-Iraqi talks next week in Geneva, Western diplomats indicated that the Iraqis will be disappointed by Bush's announcement tonight that Secretary of State James A. Baker III will not go to Baghdad for further talks.

Iraqi Foreign Minister Tariq Aziz, who will meet with Baker in Switzerland on Wednesday, said in his acceptance statement that Iraq would continue to press its demands that other regional issues be brought into the discussions, and he gave no indication that Iraq is reconsidering its five-month occupation of Kuwait. His statement made clear that the two nations remain far apart on key issues in the crisis.

Bush's decision to reject a Baghdad visit is a sharp setback for Iraq, which viewed the Geneva meeting as a prelude to substantive discussions in Baghdad between Baker and Iraqi President Saddam Hussein, according to diplomats.

Western diplomats here had said earlier today, before Bush ruled out a Baghdad visit, that Baker would eventually have to meet here with Saddam if the United States wanted to avert war. "The only meeting with a chance to get results is between Baker and Saddam," said one Western diplomat.

Iraq's speaker of parliament, Saadi Mehdi Saleh, emphasized the same point in an interview on Thursday when he said: "We are serious about peace. There is no need for initiatives from one side or the other if we can just agree on a date for Mr. Baker to come here."

In his acceptance statement, Aziz used language that appeared to depart in several respects from Bush's proposal on Thursday, in which the White House said the Geneva talks would include "no negotiations, no compromises, no attempts at face saving and no rewards for aggression." He closely echoed Iraq's previous demands that the United States hear its concerns regarding regional conflicts and security issues, among them being the Israeli-Palestinian conflict, Syria's occupation of Lebanon and Israel's alleged production of nuclear weapons.

"Iraq will . . . seek to know if the other party is ready to achieve peace and security in the whole region on the basis of justice and equality," the state-run Iraqi News Agency quoted Aziz as saying. "The Palestinian cause and the Palestinian people's right to establish their free, independent states on the land of Palestine, with Jerusalem as its capital, come at the top of the issues which require the application of justice and equality."

Diplomats here warned, however, that any Iraqi attempt to put preconditions on its withdrawal from Kuwait or to link it to regional issues could derail the Baker-Aziz talks.

The Iraqi acceptance statement came after a meeting between Aziz and Michel Vauzelle, chairman of the French parliament's foreign affairs committee. Diplomats said Vauzelle, who arrived in Baghdad on Thursday, appeared to come away with few significant results.

The European diplomatic track advanced in Luxembourg today, as the European Community invited Aziz to hold talks the day after he meets Baker. The EC also discussed a French proposal to guarantee that Iraqi forces would not be attacked if they withdrew from Kuwait and to hold talks on regional issues after Iraq's withdrawal.

Saleh and other officials have said Iraq favors an approach that would raise the Palestinian problem and other Mideast issues. Despite its hard-line public statements ruling out withdrawal from Kuwait, Baghdad has sent quiet signals recently that it could end its occupation under such a formula and that its concerns need not be addressed simultaneously with its withdrawal.

Iraq's original aims when it invaded Kuwait on Aug. 2 included discussion of longstanding Iraqi territorial claims in Kuwait, particularly the strategic islands of Warba and Bubiyan, and the Rumailah oil field straddling the border of the two countries.

Aziz's reply tonight, as well as those by other Iraqi officials earlier in the week, suggested Iraq has not given up on the idea of linking these issues to an overall settlement of the gulf crisis. At the same time, however, officials are insisting that both sides approach the dialogue "without preconditions."

As if to emphasize that Iraq was not giving in to U.S. pressure, the Iraqi News Agency said the acceptance of Bush's proposal for talks in Geneva was made "not in appreciation of the United States administration stance."

"Iraq will assert its firm, principled stance in refusing the style pursued by the United States administration -- that of using the language of threats," Aziz said.

Aziz blamed the United States for the month-long stalemate over efforts to arrange a U.S.-Iraqi dialogue, denying White House assertions Thursday that Saddam had rejected Bush's Nov. 30 proposal to send Baker to Baghdad and for Aziz to travel to Washington. That offer expired Thursday.

With the approach of the Jan. 15 deadline set by the United Nations for Iraq to quit Kuwait or face the threat of war, diplomatic sources told the Associated Press today that Iraq has told embassies to prepare to move out of Baghdad to facilities in a city 65 miles to the west, but Iraq's news agency denied reports that government offices would be relocated outside the capital.