Iraq Fires Oil Minister, Scraps Gas Rationing : Embargo: Official’s conservation program is called unnecessary. Hussein’s son-in-law replaces him.

AMMAN, Jordan —  The Iraqi government announced Sunday that it has scrapped the controversial gasoline-rationing program installed just five days earlier, dismissed the oil minister who authored the plan and replaced him with President Saddam Hussein’s son-in-law.

The surprising development came as a Moscow trouble-shooter, pursuing a Soviet scent of Iraqi flexibility, met twice with Hussein.

Gasoline rationing was a double blow to Hussein. It led foreign analysts to conclude that the U.N. embargo was damaging the economy and threatening the war machine, and it raised discontent on the streets, where Baghdad’s tens of thousands of motorists queued up for rationed supplies.

The rationing began to ease Saturday, when the allowance for cars with large engines was increased. The allowance for heavy commercial vehicles had been increased earlier.

Oil Minister Issam Abdul-Rahim Chalabi, a respected petroleum expert who had been in the post since 1987, justified rationing on grounds that the embargo was drying up supplies of imported additives for motor fuels and lubricants.

But Baghdad Radio, announcing the change, said Sunday that stocks are sufficient.

“It appeared as a result of discussions that the Oil Ministry had introduced rationing on the basis of erroneous information,” the radio reported.

Chalabi was fired. Hussein named his son-in-law, Military Industrialization Minister Hussein Kamel Majid, to take over the important portfolio, keeping power within his trusted tight circle.

On the diplomatic front, Yevgeny Primakov, Middle East adviser to President Mikhail S. Gorbachev, delivered a message from the Soviet leader during a 40-minute meeting with Hussein in Baghdad, the Iraqi News Agency reported. Soviet officials said later that they had arranged a second session Sunday evening.

Gorbachev’s letter demanded that the situation in Kuwait be restored to what it was before Iraq invaded and promised that the Soviet Union will do its best to find a peaceful settlement, the British Broadcasting Corp. said, according to a Reuters news agency report.

Both Primakov and the Soviet president have told reporters in the past week that they sensed some sign of flexibility in the Iraqi position.

Soviet hopes for movement stalled a U.N. vote Saturday night in New York. The Security Council was preparing to vote on another tough resolution against Iraq when Soviet Ambassador Yuli M. Vorontsov, after conferring with his American counterpart, Thomas R. Pickering, and British, French and Chinese ambassadors, gained a 48-hour delay. The Soviet envoy told reporters that Moscow wanted to ease the atmosphere for Primakov’s talks with Hussein.

The pending U.N. resolution demands that Baghdad pay reparations for its army’s occupation of Kuwait, release all foreign hostages and allow foreign embassies to operate freely in Kuwait city. Some analysts argue that Iraqi rejection of the demands would constitute a legitimate cause for war.

Primakov’s visit to Baghdad coincided with the beginning of Gorbachev’s two-day Paris summit with French President Francois Mitterrand. Both leaders are targets of an Iraqi campaign to split the unified big-power demand for unconditional withdrawal of Iraqi troops from Kuwait.

At the same time, more than 300 French hostages were preparing to leave Baghdad on a chartered Iraqi Airways flight to Paris. The plane is scheduled to leave today.

The French Foreign Ministry said Sunday that the aircraft will return to Baghdad with a cargo of medicine. A ministry spokesman said medicine has not been banned under international sanctions and that the cargo will be inspected by U.N. officials before the plane leaves for Iraq.

Soviet envoy Primakov had met officials in Egypt, Syria and Saudi Arabia--Iraq’s primary Arab opponents in the crisis--before arriving in Baghdad on Saturday.

The past week produced a swirl of motion as the gulf crisis approached the beginning of its fourth month.

Moscow, which has backed every U.N. Security Council resolution punishing Iraq for the Aug. 2 invasion of Kuwait, stepped up efforts for a political solution but gave no signal that it was promoting an independent peace plan.

Saturday in Madrid, Gorbachev said, “There are some signs that there is an awareness in the high circles of Iraq that they cannot find a solution through ultimatums.”

However, the Soviet leader did not explain the signs and admitted, “Perhaps I am wrong.” He said the Iraqi stance may be clearer in “the next few days,” a probable reference to the Primakov visit.

A spokesman for Palestine Liberation Organization Chairman Yasser Arafat, who was also visiting Baghdad on Sunday, said the PLO expects the Gorbachev-Mitterrand talks to “open the door wide” to a political settlement of the crisis.

What lay behind the professed optimism was not clear. Rumors have swept the Middle East for weeks that the Iraqis were prepared to cut a deal that would leave them in control of a disputed oil field and two Kuwaiti islands that screen passage from their main port of Umm al Qasr to the Persian Gulf. The talk gained credence when Saudi officials were quoted as talking about the possibility of unspecified arrangements “between sister states.”

But within 24 hours, under clear American pressure and with Kuwaiti backing, Saudi officialdom disavowed any hint of change in policy, saying there would be no deals with Baghdad, only insistence on unconditional withdrawal.

Several times in the nearly three months since the crisis erupted, triggering a massive Western military buildup in the gulf region, foreign officials thought they had detected a change in Iraqi policy or tone, but in every instance Baghdad ultimately returned to Hussein’s Aug. 12 political proposals. These declare Kuwait an Arab issue, demand a Western withdrawal from the gulf and tie any negotiations to simultaneous international consideration of longstanding Middle East problems.

The pending release of the French hostages during the Gorbachev-Mitterrand summit left little doubt of the strategy in Baghdad, which sees Moscow and Paris as potentially more pliable than Washington and London. When the release was first broached a week ago, French officials said they would welcome the return of the hostages but rejected any suggestion of political strings attached.