The State Department yesterday launched a publicity offensive against Saddam Hussein, accusing the Iraqi leader of deliberately starving his people even as he puts the finishing touches on a lavish resort complex--complete with artificial lake and Ferris wheel--for backers of his regime.

In a new report, the department contends that Iraq sells more than enough oil to pay for the basic needs of its people. Indeed, the report says, Iraq now imports as much food as it did before its troops invaded Kuwait in 1990.

As a consequence of mismanagement and corruption, however, much of the food, medicine and other supplies purchased under a humanitarian exemption to international trade sanctions never makes it to the people who need it most, according to the report.

Timed to coincide with the opening next week of the U.N. General Assembly, where the trade sanctions are sure to be a major topic of debate, the report also accuses Saddam of diverting scarce resources to shore up support within his ruling Baath Party. To make the point, the report includes a newly declassified satellite photograph of Saddamiat al Tharthar, a new resort city 85 miles west of Baghdad that is said to include stadiums, an amusement park, hospitals and housing for 625 government officials.

"Despite its claims that the people of Iraq are dying due to a lack of food and medicine, Saddam Hussein doesn't hesitate to spend hundreds of millions of dollars for the entertainment of Baath Party officials and cadres," State Department spokesman James P. Rubin said in releasing the report.

The report is aimed in part at countering Iraqi efforts to undermine international support for the trade sanctions by blaming them for widespread disease and malnutrition.

That Iraqis are suffering is not in dispute. In a widely reported study released last month, UNICEF reported that in southern and central Iraq, where most of the population is concentrated, the death rate for children under five has more than doubled in the years since the sanctions were imposed. The infant mortality rate, meanwhile, rose from 47 per 1,000 live births to 108 per 1,000 live births.

The Clinton administration has long maintained that Iraq has ample resources for food and medicine from oil sales conducted under a U.N.-supervised "oil-for-food" program. But the sanctions face growing opposition in the U.N. Security Council from France, Russia and China. So the administration is backing a British and Dutch proposal that would lift the ceiling on oil sales used to pay for humanitarian supplies, provided that Iraq allows U.N. weapons inspectors, expelled from the country last year, to return.

At the same time, the State Department report argues that lack of resources, in the end, is not the problem.

According to the document, Iraq is now selling almost as much oil as it did before its invasion of Kuwait, with exports projected to exceed $6 billion for the six-month period ending in November. But much of Iraq's oil income, which can only be used for humanitarian supplies, has gone unused. For example, the report says, only $1.7 million of the $25 million earmarked for nutritional supplements has been spent by the Iraqi government, while medicines and medical supplies worth $200 million "sit undistributed in Iraqi warehouses."

The report also notes that in northern Iraq--where the United Nations, not the government, distributes humanitarian aid--child mortality levels have dropped to below pre-Gulf War levels.

"There is absolutely no reason why children should be denied nutritional supplements and medicine," Martin S. Indyk, the assistant secretary for Near Eastern affairs, said at yesterday's briefing. Indyk accused Saddam of trying to "use the plight of Iraqi children as a propaganda weapon against the sanctions."

The report also accuses Saddam of continuing brutality against his own people, including an episode in June in which Iraqi forces allegedly destroyed 160 homes in a Shiite Muslim village near Basra in southern Iraq. The report buttresses the claim with satellite photographs showing the village before and after the attack is said to have taken place.

The overall pattern, Indyk said, is one of weakness. "Saddam is more on the defensive," Indyk said. "His base of support is narrowing. . . . He's had to take resources away from the people and provide them to his Baath party cadres and others in order to maintain their support."