Bush condemns Saddam "ploy"; Heath decries president's "personal" outbursts, stories on A2. Can U.S. fight alone? Story on A7.BAGHDAD, Iraq (Reuters) - Iraq threatened all-out war in the gulf if allied forces tried to drive it out of Kuwait and said Israel would be easy prey.

Three months to the day after it conquered Kuwait, Baghdad said Friday there would be no short, sharp conflict."When the spark is ignited, it will be the beginning of an all-out war that will burn everything dear to the aggressive invaders all over the world," declared the government newspaper al-Jumhouriya. "Those who call for a lightning war will curse their destiny."

Earlier this year Iraq threatened to destroy half of Israel with chemical weapons if the Jewish state struck at any Arab country.

The Iraqi defense ministry paper al-Qadisiyah said the outcome of the fighting would not be decided in a single battle:

"Iraq's army will not wage one battle. (There will) be a series of battles and the last bullet will surely be an Iraqi mercy bullet fired at the dying American cowboy."

U.S. gulf commander Gen. Norman Schwarzkopf said in an interview with the New York Times his men could obliterate Iraq if ordered to do so.

He said Iraq's much-vaunted missiles would have only a modest effect because they were highly inaccurate and Baghdad had a relatively small number of launchers. He played down Iraq's ability to mount chemical warheads on its missiles.

Washington and its European and Arab allies have so far massed more than 310,000 troops in the gulf in response to Baghdad's Aug. 2 invasion of Kuwait. More than two-thirds of the troops are American, and U.S. Defense Secretary Dick Cheney has refused to put an upper limit on the number to be deployed.Schwarzkopf has recommended that American combat units in Saudi Arabia be rotated out of the country every six to eight months, meaning that soldiers who arrived in August or September may very well remain past Christmas.

Military analysts have suggested that the allies might launch an attack within the next few weeks to try to drive Iraq out of the conquered emirate. But President Bush denied Thursday that he was preparing Americans for war.

Iraq has said it expects war to break out at any moment. President Saddam Hussein has put his million-strong army on high alert.

More than 1.5 million people have been displaced by the crisis, World Bank officials and other sources say.

Hundreds of thousands of workers from the Third World remain in Iraq and Kuwait. Their numbers dwarf the 1,000 hostages from the United States, 1,400 from Britain and 3,000 from the Soviet Union.

Hundreds of thousands of others are returning to their distant homelands, some as far away as the Philippines and South Korea, said officials at the World Bank, which coordinates aid at its Washington headquarters for the hardest-hit countries.

The foreigners were lured to the Middle East by the better wages that Iraq and Kuwait could pay because of income from oil.

The largest and most recent group forced from their homes are citizens of Yemen who have been living in Saudi Arabia, some of them for decades. The Saudi government is retaliating against Yemen because of Yemeni sympathy for Saddam.

About 2 million of the 12 million people in Saudi Arabia were Yemeni. The newly united republic of Yemen also has a population of nearly 12 million. The uncertain border between the two countries runs for thousands of miles, much of it through the desolate area called the "Empty Quarter." A report from Yemen estimated the number of Yemenis who have fled across it at 750,000.