CNN correspondent Peter Arnett yesterday interviewed Iraqi President Saddam Hussein. Describing the circumstances surrounding the interview, Arnett said he was driven to a surburban area where he met Saddam in a bungalow that looked like every other "house in the neighborhood." Three Iraqi television cameras were there. Arnett said Saddam spent two hours with him, 90 minutes of it in an interview.

Arnett described Saddam as "very relaxed . . . dressed in an impeccable blue suit and a pretty tie. . . . He was cordial with me. The interview he gave was chilling."

What follows is a transcript of Arnett's account of the interview on CNN obtained from Reuter and staff reports:

I spent an hour and a half with Saddam Hussein this evening, with the president of Iraq. It was an unexpected meeting. I was called at the hotel about 4 o'clock to prepare to meet a senior official. We drove through the dark streets of Baghdad. I waited about an hour at a private bungalow. The president gave me about -- nearly two hours of his time, 90 minutes of that in an interview.

I brought up some points that I thought that everyone had been asking me in the past week since I've been here on the phone about what was the Iraqi view of this, that and other matters.

The first one I did bring up was the oil spill in the gulf. I asked what he had to say about claims by the United States that Iraq had opened its spigots, or opened spigots in Kuwait, and let oil pour into the gulf.

The president responded that the United States has used oil as a weapon by attacking Iraqi tankers and oil installations on land. He said it showed that the U.S. is not concerned about the effect on the environment. Therefore, he said, if his field commanders used oil in the framework of self-defense, such as trenches filled with burning oil or other techniques, his commanders would be justified in this action.

He said if Iraq uses oil for self-defense, including in the sea, then Iraq will be justified in taking such an action. He said the future will show which action the United States is responsible for and which one Iraq is responsible for.

I asked, Do you reserve the right to use oil as a military weapon? He said, I have said what I have said and the issue is clear.

I asked about Iraqi aircraft that are reported flying to Iranian air fields. He said that Iraq and Iran are neighboring Moslem countries, and regardless of the circumstances of the past, both see the current confrontation here as a battle between faith and the infidel. He said it's only natural that if certain Iraqi aircraft find it necessary to come down in that neighboring country, he said this could be done in the light of the spirit, in the light of the practice or the light of their history.

I asked, Will the planes be used again in the war? He said, In all circumstances we respect the decisions and regulations of the state of Iran. Would they be used again, I asked him, would the planes be used again? He said each case in its own circumstance.

And the POWs, the American and other multinational pilots that are being captured here, I asked about his government's decision to place captured pilots as human shields at strategic locations. The Iraqi president said Iraqi students were being unfairly interned in the West, in England and maybe elsewhere, and there are restrictions, he said, on Arabs of Iraqi descent.

I asked about how his human-shield decision squared with his promise the day after the war to treat captured soldiers according to the Geneva Convention. He responded, Does the Geneva Convention allow Iraqi students to be imprisoned in the West?

He expressed some annoyance with what he called hypocritical Western politicians who convinced him last year that if he let go the foreign hostages that he held that he would keep the peace. He said if we had kept these 5,000 hostages here, would Bush still have attacked Baghdad?

Chemical weapons came up. I asked, Would you use chemical weapons in a land war in Kuwait? He responded, We shall use the weapons that will be equatable to weapons used against us by our enemies. When I said that the multinational forces said they would not use chemical weapons and would that mean he wouldn't use them, he said, he responded again with a similar answer, and he said, I don't mean that, I said Iraq would use weapons that will equate with weapons used against us.

I asked about his unconventional weaponry stores. He said that missiles fired at Israel and Saudi Arabia -- which he proudly called al-Hussein missiles, which were adaptation of the Scud Soviet missile -- he said they have nuclear, chemical, and biological capabilities.

But he did comment, he said, all the air superiority you see now that has come upon us has failed. He said, we have maintained our balance using only conventional weapons. He added, we pray that not a lot of blood will be shed for many nations; we pray we shall not be forced in taking a forced measure.

On the length of the war, I said, how long do you feel the war will take? He said, only God knows, Iraq will win the admiration of the world with their fighting prowess. He was talking about the soldiers. He added, lots of blood will be shed, lots of blood. We are referring to blood on every side, American, French, Saudi blood, and Iraqi.

Earlier I had asked him about any potential of dialogue and negotiations. He said that was up to President Bush. He said that the dialogue could only come between the peoples of the lands of Iraq and in the West and elsewhere in the world.

Towards the conclusion of the interview, I asked if he had any doubts about the outcome, about the victory he was talking so much about? He answered confidently, not even one in a million.

I asked at the conclusion what message he hoped would come through in this interview. He said, I wish the Americans well and pray none of their sons will die, and that all the people of Iraq are grateful to noble souls in America demonstrating against the war, in France and Germany and Spain and all others demonstrating against the war. . . .

. . . A sense I got from the interview was that President Saddam Hussein was saying that he has been able to maintain the balance in the war using conventional weapons as at this point. He was suggesting that if his losses became too great he may be obliged to use the unconventional weapons that he has at his disposal.

I don't think there is any threat at this point, but he said let's pray, basically that we don't go that far, that the losses are not that great . . . .

I got the, there is no sense of any willingness at all to accept the fact that, I mean he was adamant that Kuwait is part of, adamant that Kuwait remains part of Iraq forever.

{Arnett was asked by the CNN anchor whether Saddam expectsa major land war soon.} He would not give any day. He just said that when it was joined, he said that when the land war was joined he was ready to fight it. I asked him when it would happen and he said that's basically up to God to decide when the battle will start. I pushed him on that and he would not come through with any kind of timetable.