A group of Iraqi diplomats Thursday began returning to their overseas posts after Saddam Hussein told them he was "ready for a serious and constructive dialogue" to avert war in the Persian Gulf, Iraqi officials said.

But Iraq denied it was forming a new peace initiative, and Saddam reiterated that any diplomatic settlement would have to link an Iraqi pullout from Kuwait with an Israeli withdrawal from the West Bank and Gaza Strip.Kuwait's foreign minister said it was too late for peace initiatives in the gulf. His comments followed new signs of war readiness Wednesday, with Iraq test-firing another missile and the United States urging Americans to leave countries where pro-Iraqi sentiment is high.

"The whole world has given enough time for a peaceful settlement of the gulf crisis," the Kuwaiti official, Sheik Sabah Al-Ahmed Al-Sabah, told a news conference in Beijing.

He maintained that only military force would dislodge Iraq from Kuwait.

"Whether by the Arab world, whether by the friendly countries, whether by the Third World countries, or by the big powers, it is very late for such (peace) initiatives. It would not be useful," the sheik said.

Iraq denied reports in recent days that Saddam was preparing a diplomatic initiative ahead of the Jan. 15 U.N. deadline for Iraq to pull out of Kuwait.

Saddam on Wednesday met with 20 diplomats who had been recalled to Baghdad ahead of the deadline, diplomats said on condition of anonymity. The returning ambassadors included those to the United States and the United Nations.

"We are ready for a serious and constructive dialogue based on mutual respect and the rejection of the course of hegemony and arrogance which the American administration tries to impose on us," the state Iraq News Agency quoted Saddam as telling the diplomats before they left.

But Saddam told the envoys that his Aug. 12 initiative, which links the Arab-Israeli dispute to the Kuwait crisis, should be the basis for any settlement, the diplomats said.

Saddam showed little willingness to compromise on the issue. He said Iraq is "ready to take any sacrifice for the battle it wages against the United States and its allies," the Iraqi News Agency said.

The diplomats said the envoys were beginning to leave Iraq and return to their posts overseas Thursday.

Iraq said it still has not agreed to any direct talks with U.S. officials to try to avert war. On Wednesday, Soviet Deputy Premier Igor Belousov arrived for talks in Baghdad.

Iran Thursday test-fired a Soviet-made, SA-6 anti-aircraft missile, acknowledging for the first time that it had acquired the advanced long-range weapon.

In other developments:

- Thousands of women and children demonstrated in Baghdad Thursday to protest the U.S. interception of an Iraqi freighter in the Arabian Sea. The protesters marched from downtown Baghdad to the U.S. and British embassies, singing patriotic songs and shouting slogans denouncing the interception of the "peace ship." The Iraqi freighter was seized Wednesday by U.S. and other forces. It was reportedly carrying sugar to Iraq in violation of the U.N. trade embargo.

- Jordan has beefed up its security forces along the cease-fire line with Israel as a precaution against a surprise attack by the Jewish state, Jordanian military sources said Thursday. They declined to give any figures of military strength along Jordan's western border. Israel's military has been on alert since Iraq invaded Kuwait Aug. 2 and said it would retaliate if Iraq attacks.

- Syria's senior cleric told Bush in an open letter: "Should you provoke this war in the gulf, the blood of hundreds of thousands of people will be on your head. "In the end, you will die," Syria's Sunni Moslem mufti, Sheik Ahmed Kaftaro, said in the letter, published Thursdayin Beirut's pro-Syrian Ash-Sharq daily.