Britain said Tuesday Iraq had clearly ignored United Nations  disarmament demands, rallying behind President Bush  as he prepared to set out his case for war to American voters and skeptical allies. Warning Baghdad to stop its "game-playing," British Foreign Secretary Jack Straw said it was in "material breach" of U.N. Security Council resolutions, echoing Washington for the first time with lawyerly wording that lays Iraq open to an attack. Bush is expected to use his State of the Union address at 9 p.m. EST to argue that war is becoming unavoidable after weapons inspectors told the U.N. Monday that Iraq was dragging its feet in complying with their demands.

Iraqi Deputy Prime Minister Tareq Aziz said Baghdad was prepared to step up its cooperation but warned it had handed out hundreds of thousands of weapons and would attack American troops assembled in neighboring Kuwait if necessary.

"They will be received with bullets, not flowers," Aziz told Canada's CBC television in an interview in Baghdad.

The threat to Kuwait, invaded by Iraq in 1990, sent oil prices back up to 32.70 dlrs a barrel after slipping Monday.

Financial analysts felt the inspectors report seemed to make war virtually inevitable and expected Bush's speech to give some idea of when it might start, with estimates focusing on March.

European stocks rebounded, gold lost some of its recent gains and the dollar steadied as markets braced for the address.

Washington reiterated it was losing patience with Iraq after chief U.N. weapons inspectors Hans Blix and Mohamed ElBaradei, head of the U.N.'s nuclear watchdog, presented their key report.

Blix disclosed that Iraq was testing prohibited long-range missiles and was not coming clean on chemical and biological agents it still may have.

Britain has consistently backed America but had until now avoided directly alleging a "material breach," which Washington argues is the trigger for war as agreed by the United Nations.

"As of today, according to the reports we have received, Iraq is now in further material breach. So it is profoundly serious for Iraq," Straw told BBC radio, referring to a breach of November's U.N. resolution 1441 demanding Iraqi disarmament.

FRENCH OPPOSITION

Most other key U.N. Security Council members say the inspectors need more time to complete their job and that a new U.N. resolution is required to authorize any attack.

France reiterated its opposition to any unilateral military strike on the Arab country Tuesday and China said the inspectors should decide themselves how much time they need.

Monday even Straw had said the continuation of inspections was up to the council and not an individual state.

Straw denied that a further report by inspectors to the Security Council on February 14 would be a deadline for Iraq to comply. "There aren't ultimatums being talked about at the moment. But each of these dates is very significant indeed."

"Iraq would be making the most profound mistake if it thought it could go on with its game-playing any longer."

The inspectors visited at least eight more sites Tuesday, indicating that they had won at least some more time to search for weapons of mass destruction.

Jacques Baute, head of the International Atomic Energy Agency's Iraq Action Team, said his team needed several more months for their search for nuclear weapons.

"If all goes well, these few months should not turn into a year, obviously," he told France's RTL radio.

When the interviewer noted that the United States was not ready to wait that long, he said: "It's difficult to make politicians understand that technical questions cannot be solved from one day to another, just like that."

While voicing defiance, Aziz promised more cooperation.

"They're asking Iraq to provide more cooperation. OK, let them say that. We are doing that," he told CBC.

He said Iraq would not seek to attack targets on the U.S. mainland if Washington launched an invasion, but could strike at Kuwait if a U.S. strike was launched from there.

Aziz said the only two contentious issues were whether U-2 surveillance planes could fly over Iraq and the conditions under which Iraqi scientists could be interviewed.

ElBaradei told the Security Council there was no evidence that Iraq had revived a nuclear weapons program dismantled in the early 1990s. He asked for more time, perhaps a few months, for inspectors to complete their work and "help us avoid a war."

Blix, who dodged giving an estimate of time needed, was harsher in his evaluation. He said Iraq had test-fired two new types of long-range missiles beyond a permitted range in what could be a clear violation of U.N. resolutions.

He did not corroborate U.S. claims that Baghdad had rebuilt its arsenal but said his teams had found a new site containing a precursor to mustard gas.

He also listed the unresolved issues of the whereabouts of quantities of the deadly VX nerve gas, growth media for biological agents such as anthrax, 550 artillery shells filled with mustard gas and an accounting of 6,500 chemical bombs.

Secretary of State Colin Powell  said Washington would decide its next step after consulting government leaders this week.

Friday, Bush meets British Prime Minister Tony Blair  to decide how much longer the inspection process should take.

PHOTO CAPTION

Chief U.N. weapons inspector Hans Blix (far right, end of desk) reads his report on Iraqi weapons to the United Nations Security Council January 27, 2003. Blix said that inspections by his chemical, biological and ballistic investigation teams have found that the Iraqi arms declaration does not resolve major outstanding arms issues. (Jim Bourg/Reuters)