Iraq said Tuesday it had robbed the United States of any justification for waging war against it by agreeing to re-admit U.N. weapons inspectors and meeting demands of the international community. But the United States and its main ally Britain were hostile to the point of dismissing Iraq's move as a ruse. London warned against letting Saddam "make a monkey" of the world.

"All the reasons for an attack have been eliminated," Iraqi Deputy Prime Minister Tareq Aziz said during the opening of a solidarity conference.

Aziz said Iraq was ready to work out a plan with U.N. Secretary-General Kofi Annan for the return of U.N. weapons inspectors after an absence of nearly four years.

Iraqi President Saddam Hussein, under intense diplomatic pressure backed by the threat of U.S. military action, agreed on Monday to readmit the weapons inspectors without conditions.

The Iraqi news agency reported Tuesday that Saddam will send a letter to the U.N. General Assembly in the next few days.

The message will be read out by Foreign Minister Naji Sabri, INA added, without giving further details.

Washington, whose declared policy is to oust Saddam, said the Iraqi president could not be trusted, describing his move as "a tactical step" to avoid strong U.N. Security Council action.

British Home Secretary David Blunkett added: "This is a very, very serious step forward, but we are dealing with serious politics here, with someone who has every intention of making a monkey of the rest of the world."

U.S., BRITAIN REVEAL TRUE COLOR

Aziz said the U.S. and British response to Iraq's decision had revealed their "true (negative) intentions toward Baghdad."

"The United States has no pretexts or genuine reasons to justify its aggression against Iraq," he said, accusing the two nations of coveting Iraq's oil wealth and seeking to divide the Middle East.

Global stock markets and the dollar surged Tuesday and oil and bond prices slid after the Iraqi announcement.

The sudden Iraqi decision already shows signs of dividing the five permanent members of the U.N. Security Council -- the United States, Britain, France, Russia and China.

Russia and China, permanent members of the Security Council, hailed Iraq's agreement to allow U.N. weapons inspectors, describing it as a "positive" and "important step."

"At this stage, it is important that the chance to settle these issues through political means has finally emerged," a Russian foreign ministry statement said.

Japan also welcomed the news, but said the real issue was whether Baghdad would respect that promise by allowing "the immediate, unconditional and unlimited acceptance of inspections and abolishment of weapons of mass destruction by Iraq."

French Foreign Ministry spokesman Francois Rivasseau told Europe 1 radio the international community must "not lose any time, act quickly and send back inspectors" with free access.

The 15-member U.N. Security Council meets later Tuesday to review the Iraqi decision.

ARABS SIGH WITH RELIEF

Arab countries, which view Israel's occupation of Palestinian and other Arab lands as a greater threat to regional stability than Iraq, greeted the Iraqi move with relief.

"This is the beginning of a process of easing the tensions," Egyptian Foreign Minister Ahmed Maher said.

Nabil Abu Rdainah, a senior aide to Palestinian leader Yasser Arafat said Iraq's move had deprived the United States of any excuse for military action against Baghdad.

Kuwait, at the core of the crisis with Iraq for its invasion of Kuwait in 1990, said that the standoff is far from over.

"The issue is not as simple as how they may imagine (in Iraq) and there is no benefit in trying to play like in the past," one official said, referring to crises with Iraq since the 1991 Gulf War ended its seven-month occupation of Kuwait.

Syria, which is on a U.S. list of countries backing terrorism, called on the United States to abandon the "drums of war" and resort to "reason and wisdom" to solve the conflict.

President Bashar al-Assad was quoted as telling the Syrian press that Washington cannot invoke U.N. measures against Iraq without putting similar pressure on Israel to comply with U.N. resolutions over territory it seized in the 1967 war.

Israel, which champions an attack on Baghdad, said Iraq's offer was unlikely to prevent U.S. action against Baghdad.

"I can't guess but the United States' commitment is far-reaching, very clear, and I almost don't see how it will retreat from it," Israeli Foreign Minister Shimon Peres said.

Peres said he did not believe weapons inspectors would be able to locate all Iraq's non-conventional weapons plants.

Reaction was mixed elsewhere in the world.

Muslim Malaysia backed Iraq's demands that punitive U.N. sanctions imposed on Baghdad after its invasion of Kuwait should now be scrapped for agreeing to allow the inspectors back.

Australia, which takes part in the multinational naval force blockading Iraq in the Gulf, cautiously welcomed the decision but said Baghdad had to back words with action.

PHOTO CAPTION

By agreeing to re-admit U.N. weapons inspectors, Iraqi Deputy Prime Minister Tariq Aziz says his country has robbed the United States of any justification for waging war against Iraq. The United States and its main ally Britain were skeptical of Iraq's latest move. Aziz is shown under a picture of President Saddam Hussein as he addressed reporters during a press conference in the Ministry of information in Baghdad on Sept. 14, 2002. (Damir Sagolj/Re