Foreign ministers from the six member states of the Gulf Cooperation Council discussed the Saudi plan in Jeddah on Sunday, but the meeting ended without a final statement.

Iraqis pay the price of sanctions, not the government

A senior Saudi official said restrictions on military sales should remain, but Iraq should be allowed to sell oil and other commodities freely, so that the Iraqi people would no longer be made to suffer for the sins of their rulers.

The initiative comes despite renewed Iraqi criticism of Saudi Arabia and Kuwait for providing bases for US and British aircraft during the airstrikes on Iraq last month.

The Jeddah talks were intended to bring about a consensus before a meeting in Cairo later this month to prepare for a full Arab summit on Iraq.

Middle East Correspondent Jim Muir: Saudi still views Iraqi leadership a threat

Iraq is allowed by the UN to export $5.26bn worth of oil every six months to buy food and medicine, but correspondents say the so-called "oil-for-food" deal has not brought about any appreciable improvement in the condition of ordinary Iraqis.

Baghdad complains the UN sanctions committee still blocks or holds up essential humanitarian supplies.

At their summit last month, the GCC countries, of which Saudi Arabia is the largest and most influential member, called on Iraq to commit itself to implementing all UN resolutions to bring about the relaxation of sanctions.

Disarray of international allies

The BBC's Middle East Analyst, Roger Hardy, points out that Saudi Arabia is airing this point of view at a time of bitter criticism from Baghdad about the role of Saudi Arabia and Kuwait in the recent US and UK air attacks on Iraq.

Iraqi MPs criticised Saudi "treachery"

Our analyst suggests that the reported proposal does broadly reflect official Saudi feelings towards the Iraqi situation, although he doubts whether it has a chance of being adopted as Gulf policy.

Kuwait remains firmly against any easing of the embargo against Iraq and initiatives by individual GCC states need to be endorsed by all six to become policy.

Saudi Arabia and other US allies in the region have found themselves in an awkward position as opposition to US policy on Iraq has hardened among some Arab populations.

The Saudi proposals come on the same day as an article by the controversial former UN weapons inspector Scott Ritter.

Ritter alleges Washington has subverted and ultimately destroyed the credibility of Unscom, the UN special commission charged with disarming Iraq of weapons of mass destruction, by using Unscom data to support last month's raids.