Saudis explores opening Baghdad embassy

JEDDAH, Saudi Arabia, Aug 1 (Reuters) Saudi Arabia said on Wednesday it was exploring opening an embassy in Baghdad, a move long requested by Washington, but said it was ''astounded'' by criticism of its Iraq policy by a senior US official.

At a joint news conference with the US secretaries of state and defense, Saudi Foreign Minister Prince Saud al-Faisal also said his country would take part in a US-planned Middle East peace conference if it addressed substantive issues.

''We welcome this initiative,'' the minister said, adding: ''There is an international movement (for peace) ... Israel should respond to these pressures.'' He said Saudi Arabia, a key US ally under pressure from Washington to back the Iraqi government, would look at opening an embassy in Baghdad for the first time since the 2003 invasion that brought down Saddam Hussein, eventually bringing Iranian-allied Shi'ite Muslims to power.

''To support the government of Iraq ... we decided to send a delegation to see how to establish our embassy in Baghdad,'' he said, speaking through an interpreter. He gave no more details.

Secretary of State Condoleezza Rice welcomed the move, saying it was an ''important step'' Washington had encouraged.

The US officials, who held talks with King Abdullah on last night, are on a stopover in Saudi Arabia, the world's largest oil exporter, to push for more support for the government of Iraqi Prime Minister Nuri al-Maliki.

But Saudi Arabia and other Sunni Muslim-led Arab countries want Iraq to do more to include Sunni Muslims in the political process and end Iranian influence and signs of the differences were evident at today's news conference.

''ASTOUNDED'' BY CRITICISM The Saudi foreign minister expressed shock at recent remarks by former U.S. ambassador in Iraq, Zalmay Khalilzad, that accused Riyadh of undermining efforts to stabilise Iraq.

''I was astounded by what he said,'' the minister said, in reference to the comments from Khalilzad who is now US ambassador to the United Nations.

''The traffic of terrorists is, I can assure you, of more concern to us from Iraq, and this is one of the worries our government has,'' he added.

Saudi Arabia is worried that Saudi al Qaeda militants fighting the US-allied Iraqi government and Iraqi Shi'ites will return to take up the fight against the monarchy.

Diplomats and analysts had predicted Riyadh would resist pressure to offer major concessions to the Maliki government, convinced it is mired in sectarianism.

''Success (in Iraq) depends on realising social justice and national unity between all Iraqis,'' the Saudi royal said.

''The Iraqi government has a great responsibility ... to stop foreign interference.'' US Defense Secretary Robert Gates and Rice met Egyptian President Hosni Mubarak and ministers from Gulf states in Egypt on Tuesday, assuring them that stability in the Middle East was a top US priority.

Washington's Arab allies fear that a US withdrawal from Iraq could spur radical forces in the region allied to Iran.

Gates and Rice have presented a forthcoming Saudi arms sales deal and new military aid packages for Israel and Egypt as a sign of their commitment to their allies.

Gates and Rice have insisted the package -- which Iran has criticised -- is not intended as an incentive to get Saudi Arabia to cooperate more with US efforts to stabilize Iraq.

Saudi Arabia and Egypt want Washington to give more focus to resolving the historic Israeli-Palestinian conflict, saying it is a festering wound encouraging Iran-backed radicalism.

Rice was due to hold talks in Jerusalem and Ramallah today with Israeli and Palestinian leaders. The defence chief is heading elsewhere in the region.

REUTERS RN DS1700