With Iraq's shattered occupation army in chaotic flight, Baghdad announced it was willing to drop all claims to Kuwait if the allied assault would only stop. But deep inside rain-darkened Iraq, U.S. forces and Saddam Hussein's best troops were locked in a fierce tank battle.

The effort to retake Kuwait City was in its final stages. American tanks vanquished an Iraqi unit at the city's airport, and the Marines said all organized resistance had been halted. Some snipers reportedly remained.Baghdad radio, in an offer swiftly rejected by the White House, announced that in exchange for a cease-fire, Iraq would accept a U.N. resolution that declared its annexation of Kuwait null and void. It also would accept a resolution that lays the groundwork for Iraqi reparations and the prosecution of Iraqis for human rights violations.

Iraq also offered to free all prisoners of war after a cease-fire.

White House spokesman Marlin Fitzwater said the Iraqi announcement fell "far short of what's necessary" to end the war, because it was "still a conditional offer." Britain said the offer was deficient because the Iraqis had not agreed to all 12 U.N. resolutions.

But Abdul Amir al-Anbari, Iraq's ambassador to the United Nations, said his country was prepared to "abide and implement all resolutions" after all hostilities cease.

Meanwhile, the allied commander said, "As far as Saddam Hussein being a great military strategist, he is neither a strategist, nor is he schooled in the operational art, nor is he a tactician, nor is he a general, nor is he as a soldier. Other than that, he's a great military man, I want you to know that."

In Iraq, a "fierce tank battle" raged, as more than 250 American tanks fought 200 Republican Guard tanks west of the city of Basra, according to Pentagon source. He said the Guard had been blocked from any escape.

Two major U.S. Army units, the tank-heavy VII Corps and the 24th Infantry Division (Mechanized), were engaging three Republican Guard infantry divisions and armored divisions some 50 miles west of Basra, the official said.

Some Iraqi forces were attempting a counterattack, he said, while others were attempting a fighting retreat toward Basra.

Pontoon bridges set up on the Euphrates River by some troops - meant to replace permanent bridges bombed by the allies - offer no avenue for heavy tanks that are under air attack, the source said. He said there are reports that individual soldiers are crossing without their equipment.

The allies have reported relatively light casualties for such a huge operation, but deaths were mounting. There were at least39 allied deaths, not including the 28 American troops killed in Monday's Scud attack.

At least 11 Americans had died; seven belonged to the 82nd Airborne but were attached to French forces in Iraq. Thirteen Britons have died - nine of them victims of friendly fire from an American A-10 "Warthog" plane that inadvertently attacked two British vehicles, said British Col. Barry Stevens.

Thirteen Arabs and two Frenchmen also were among the dead.

The extent of Iraqi casualties was not known, but they certainly were far greater.

In the fourth day of the allies' blistering land assault, U.S. military officials in Riyadh said Wednesday that the fierce desert warfare since Sunday had knocked out 26 Iraqi army divisions - about 260,000 men - and 500 tanks.

Schwarzkopf cites surprise

Gen. Norman Schwarzkopf, commander of allied forces, disclosed Wednesday that the allied battle plan against Iraqi troops in Kuwait relied on deception to make Saddam Hussein think the allies planned an amphibious attack.

In the most detailed briefing since the ground attack began, Schwarzkopf said such a strategy was required to offset the numerical advantage enjoyed by the Iraqi forces in Kuwait and in southern Iraq.

"It was necessary to reduce these forces down to a strength that made them weaker, particularly along the front line barrier. We continued our heavy operations in the sea."

Schwarzkopf said he wanted Iraq to believe the allied attack would come from the sea, thereby tying up its units along the Kuwaiti coast.

He spoke at a briefing in which he gave a sweeping overview of the war from the allied buildup last August to the fighting that continued to rage in eastern Iraq Wednesday.

"The war is not over," Schwarzkopf said. "You've got to remember that people are still dying out there. And those people who are dying are my troops."

He said the allies could easily have ended with coalition forces in Baghdad.

He offered the latest numbers in the war, including:

-79 Americans killed, 28 of them in the current ground campaign.

-213 Americans wounded overall.

-More than 3,000 Iraqi tanks captured or destroyed, plus 1,857 armored vehicles and 2,140 artillery pieces.

-More than 50,000 Iraqis captured.

Chasing Republican Guard

The major allied thrust was to encircle the Republican Guard in Iraq. Coalition forces had ranged as far north as the Euphrates in an attempt to prevent Saddam's prime forces from escaping.

In another battle inside Iraq west of the Kuwaiti border, one tank division of the 10-division Republican Guard was all but defeated, said U.S. military officials in the Saudi capital of Riyadh. Two U.S. divisions - the 3rd Armored and the 1st Infantry (Mechanized) - clashed with one of the Guard's three heavy armored divisions, the Taw Al-Kana.

A prime escape route for Iraqi troops could already be cut off. An Iraq military communique Wednesday said allied paratroopers had landed at an air base near Nasiriyah, 175 miles south of Baghdad on the Euphrates. A senior military official in Washington confirmed that U.S. troops had captured an airfield near Nasiriyah.

Capture of Nasiriyah would seal off routes running north toward the Iraqi heartland from the southeastern Iraqi city of Basra - since allied bombing raids have knocked out bridges across the Euphrates.

The allies made it clear that Saddam would not be allowed to survive the Persian Gulf war with power and prestige intact. On Tuesday, when Saddam pledged to withdraw, President Bush said the war would press on "with undiminished intensity."

Baghdad cites withdrawal

Baghdad radio claimed Wednesday that the withdrawal from Kuwait was completed "by the first light this morning." Allied commanders said the Iraqis were fleeing en masse, but that it was not known how many remained in Kuwait Wednesday.

Col. Ahmed al-Robayan, spokesman for the Joint Arab Forces, said the number of Iraqi prisoners had been estimated at 45,000 to 50,000.

Surrendering Iraqis shouted "Salaam! Salaam!" - "Peace! Peace!" - as they raised their hands. One U.S. official described an incident in which an Iraqi tank and armored personnel carrier came upon a U.S. humvee stuck in mud.

"They helped the humvee get out of the mud - and then they surrendered," he said.

The gloom in Baghdad was palpable. Air-raid sirens wailed and a dense, dust-laced fog covered the city, AP correspondent Salah Nasrawi reported from the Iraqi capital. Allied aircraft raided the city again Tuesday night.

In Kuwait, the entrance of the allies brought unbounded joy.

Kuwaiti troops hoisted the country's colors in downtown Flag Square - the traditional site of National Day celebrations. Allied troops paraded triumphantly into the capital.

`Nightmare has ended'

"The flag of Kuwait is once again fluttering over Kuwait!" Kuwait radio said jubilantly. "Thanks be to God that the nightmare has ended."

Kuwait City bore the scars of nearly seven months of Iraqi occupation. Power lines were down, running water was available only in parts of the city, cars were stripped and gasoline was in short supply. Rain made greasy by Iraqi-set oil well fires fell Wednesday.

A Pentagon source said U.S. Marines on Wednesday secured the city's international airport, south of the city. Marines in M-60 tanks fought Iraqi armor there Tuesday, destroying more than 100 Iraqi tanks, the source said.

Kuwaiti resistance fighters said they thought about 200 snipers had been left behind in school buildings, which the Iraqis had been using for barracks. The resistance said that by Wednesday, about 100 snipers were left.

U.S. Army and Saudi special forces had earlier filtered into the city in advance of the larger allied force. Some U.S. commandos were clad in Arab headdresses and carried small automatic weapons.

Despite Iraq's claim the withdrawal was complete, it was unclear just how many of the 300,000 to 400,000 Iraqi troops once in Kuwait remained.

U.S. commanders described the road north from Kuwait City to the Iraq's narrow southeast corner and Basra clogged with retreating Iraqi vehicles, which U.S. pilots were attacking.

Garn backs Bush decision

In Washington, Sen. Jake Garn, R-Utah, said Tuesday he strongly backs Bush's decision to go after the Iraqi army despite Saddam Hussein's offer to withdraw his forces intact from Kuwait.

"I think he is right to keep the war moving forward with undiminished intensity," Garn said. "They must leave their tanks and artillery pieces behind so they won't be a threat in the future. It makes no sense to go through what we've gone through, to make the sacrifices our men and women have made, and leave Hussein the military capability to do this again."