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MOOD OF GLOOM SETTLES OVER BAGHDAD - CITY OF `1,000 AND 1 NIGHTS’

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A mood of gloom has settled over the city of the "Thousand and One Nights." Night clubs are closing. The belly dancers have gone home. No one jokes about the prospect of war, as they did a few weeks ago.

There are no signs of panic, but many Iraqis now believe armed conflict is inevitable as the Jan. 15 U.N. deadline for Saddam Hussein to leave Kuwait or face possible attack nears.Some Iraqis believe that Wednesday's planned meeting between Foreign Minister Tariq Aziz and Secretary of State James Baker III in Geneva will at best only delay hostilities.

"America will never accept Palestine and unless they do, there's nothing to talk about," an Iraqi merchant said on condition of anonymity.

Saddam has said he would negotiate a withdrawal from Kuwait if Israel pulls out of the occupied West Bank and Gaza Strip. Washington rejects any such linkage.

Many people in Baghdad believe Saddam will not relinquish Kuwait, and that the countdown to Iraq's second war in a decade has begun. The country fought a bruising 1980-88 war with Iran.

Since the Aug. 2 invasion of Kuwait and its subsequent annexation, Iraqis have been bombarded by a propaganda blitz on state-run media that the oil-rich emirate is part of Iraq.

It seems to have had its effect, although many Iraqis would not be sorry to see their army pull out and avert a war.

Baghdad, the fabled city of the "Thousand And One Nights," was once peppered with cabarets featuring oriental dancers. But it has seen its fast-paced night life fade since the U.N. embargo imposed five months ago tightened economic conditions in the city of 3.8 million.

Still, there are no visible signs of panic in Baghdad.