Secretary of State James A. Baker III told Congress yesterday that Iran could be included as "a major power" in any new postwar regional security arrangement in the Persian Gulf along with a war-devastated Iraq.

In testimony before the House Foreign Affairs Committee that sketched out the long-term direction of U.S. policy in the Middle East, Baker indicated that the United States has not abandoned its historical goal of seeking a balance of power in the Persian Gulf between Iran and Iraq, despite its difficult relationship with Iran since the late 1970s, and the strains of the current allied battle to evict Iraq from Kuwait.

Baker offered praise yesterday for Iran's behavior during the gulf war, in which Tehran has remained neutral. But he said recent diplomatic initiatives by Iran's leadership had produced no promising avenues for altering the war.

In response to questions, Baker indicated that the administration wanted to avoid actions that would expand American goals in the war, such as a commitment to topple Iraqi President Saddam Hussein, or try him for war crimes, or seek reparations. "I think we should think through very carefully anything that would enlarge or enhance our goals and war aims," he said.

At the same time, Baker sharply warned Iraq once again that the international coalition could not accept the use of chemical or biological weapons in the war.

"We have heard, and we take at face value, Saddam's threats to use chemical and biological weapons," Baker said. "We have warned him -- and he would be well advised to heed our warning -- that we will not tolerate the use of such weapons." Echoing a similar warning from President Bush this week, Baker refused to say how the allies would respond to such an attack except that it would bring "the most severe consequences."

Baker said he agreed with a statement by Rep. Stephen J. Solarz (D-N.Y.) that if Saddam uses chemical or biological weapons, it would set off "a steely and enduring resolve on the part of the American people to see this campaign through to a successful conclusion, whatever the cost might be."

In his first congressional testimony since the outbreak of hostilities Jan. 17, Baker also outlined for the panel what he described as the administration's preliminary thinking about how to "secure the peace" after the war. He described five "challenges" that would demand attention: gulf security structures; arms control; economic reconstruction; reconciliation among the Arab states, Israel and the Palestinians; and improved U.S. energy conservation.

Baker used his testimony to reiterate broad principles and raise questions rather than to provide answers in these areas, and cautioned that the war itself and the way it ends "will greatly influence" the U.S. approach to the region.

Some analysts have said Saddam's defeat could bring a rise in anti-American and anti-Western sentiment throughout the region. Baker acknowledged this prospect. "The deepest passions have been stirred," he said. "The military actions now underway necessarily involve many casualties, great hardships, and growing fears for the future. Tough times lie ahead."

Iran recently has been seeking an influential role in gulf affairs after the war, accepting about 100 Iraqi warplanes apparently seeking sanctuary, and launching its own diplomatic overtures. Iran's leadership has long chafed at efforts by the United States to isolate it from world and regional affairs. Baker's comment seemed to be an acknowledgement that Iran could not be excluded from membership in the postwar gulf security arrangements.

While reiterating that the United States does not want Iran to mediate the conflict with Iraq, Baker went out of his way to praise Iran for its conduct during the war.

"We think Iran has conducted itself in a very, very credible way throughout this crisis so far," he said. "And we do not have any arguments with the way in which they have conducted themselves." Baker, reiterating Bush's comment this week, said, "We do not know of any Iranian proposal" for a peace settlement. The United States has no diplomatic relations with Iran but sends messages through third parties.

Baker emphasized that the war could not alter existing borders of Iraq, and that Baghdad will need help rebuilding later on.

"The time for reconstruction and recovery should not be the occasion for vengeful actions against a nation forced to war as a result of a dictator's ambition," he said. "The secure and prosperous future everyone hopes to see in the gulf has got to include Iraq."

Baker came under bipartisan criticism from members of the panel who said that American allies and friends were not providing cash quick enough to cover their share of the war's cost. Rep. Tom Lantos (D-Calif.) charged, "Japan finds it much easier to find money to buy up America, from MCA to Rockefeller Center, than to begin to pay its appropriate share of the cost."

Some lawmakers also complained that Congress was having difficulty obtaining information about the contributions. Baker countered that funds were still coming in and "we have no reason to doubt" that commitments of about $50 billion for last year and the first three months of this year will eventually be fulfilled.