The United States is accusing Iraq of staging "horrifying" poison gas attacks on Kurdish civilians, and Congress is being asked to cut off all U.S. aid and military sales to the Middle Eastern country.

Despite Iraqi denials, Secretary of State George P. Shultz on Thursday threatened to reverse the recent improvement in U.S. relations with Iraq.On Capitol Hill, the chairman of the Senate Foreign Relations Committee moved for a broad range of sanctions against Iraq, including a cutoff of U.S. aid, military support and oil purchases.

Sen. Claiborne Pell, D-R.I., introduced a resolution calling for the sanctions and accusing Iraq of "an act of genocide, a crime abhorred by civilized people everywhere and banned under international law."

Until Thursday, the State Department had said it could find no evidence to substantiate reports that the Iraqis had used poison gas against the Kurds, a non-Arab minority group inside Iraq.

But at the daily press briefing, spokesman Charles E. Redman declared in a tough statement that the allegations were true and called the Iraqi campaign "abhorrent."

Shultz then held a 50-minute session with Sadoon Hamadi, the Iraqi minister of state for foreign affairs who called to provide an account of sputtering negotiations to end the Persian Gulf war with Iran.

Redman issued a statement afterward saying Shultz had accused Iraq of an "unjustified and abhorrent" military campaign against Iraqi Kurds. A U.S. official, who demanded anonymity, said Shultz also accused Iraq of "horrifying" behavior.

Pell's resolution would ban all U.S. aid to Iraq, sales of U.S. military equipment and provision of credit or credit guarantees. It would prohibit the transfer of sensitive technology to Iraq and bar the import of Iraqi petroleum products into the United States.

It also would instruct the U.S. representative to the United Nations to vote against all loans to Iraq.

Redman declined to say whether the State Department was prepared to take action against Iraq in the commercial field.

Near East Report, a Washington weekly, reported recently that State and Commerce Department officials were trying to persuade the Export-Import bank to upgrade Iraq's credit status.

According to the weekly, the bank either would finance American business deals with Iraq or lengthen the repayment terms for trade currently insured by the independent U.S. government agency.

With chants of pro-Kurdish demonstrators ringing in his ears, Hamadi denied the charges in a brief news conference outside the State Department.

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"This is absolutely baseless and this has not taken place at all," he said.

Hamadi denounced the Democratic Party Union, a Kurdish group headed by Jalal Talabani, as terrorists who collaborated with Iran in the eight-year Persian Gulf war.

Some 40 demonstrators shouted from across the street: "Mr. Shultz, you should know, Saddam Hussein is a butcher, he should go."

Hussein is president of Iraq. The Iranians sought to drive him from office in their war with Baghdad.

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