The UN Secretary General, Mr Kofi Annan, arrived in Baghdad yesterday for crisis talks with President Saddam Hussein's government as Iraq approached what one of Mr Annan's aides described as his "moment of truth".
An Iraqi government official said they were willing to hold serious and substantive talks over the issue of UN weapons inspection but members of Mr Annan's advance party said it was far from clear whether these would go far enough to satisfy the UN Security Council.
A UN official described the situation on the eve of talks as poised 50-50 between peace and war. He said: "No one knows - when we all fly out of here on Saturday or Sunday - whether the crisis will be over or if the bombing is about to begin. It's the moment of truth."
Diplomatic sources in Baghdad said an increasingly likely scenario now was that Mr Annan would leave with an Iraqi undertaking to open presidential palace compounds (the central divisive issue) under certain circumstances.
This might go far enough to satisfy some UN Security Council members like China, Russia and France, but not enough for the US which has led the military build-up in the Gulf aimed at forcing Iraq to back down.
In that event, Britain could find itself playing a crucial role in the decision over whether to pursue air strikes. A senior adviser to Mr Annan said that, as the moment of decision neared the British and US positions were finally beginning to fall out of step.
"If there is no agreement, Washington will be ready to take military action without further discussion. They already believe they have enough legal backing for it. But the British want to put through another resolution," he said.
Briefing the press before Mr Annan's arrival one of his aides said the Secretary General would convey the views of the Security Council, whose members demand full compliance with UN resolutions mandating the search and destruction of biological or chemical weapons.
But, he said, Mr Annan could influence the success or failure of his mission in the way he presented the UN position. "He is not an actor who will read a script written for him by someone else. He is an actor for whom governments prepare the stage but he has his own line and he'll read them in his own way."
One possible way out of the crisis thought to be included in the Secretary General's package of proposals is for UN weapons inspectors in the Special Commission (UNSCOM) to be accompanied by diplomats when inspecting palace compounds.
This, it is hoped, will bridge the gap between UNSCOM's insistence on unfettered access to all sites and the Iraqi government's insistence on the preservation of its dignity and sovereignty.
Mr Annan's 10-seater plane touched down just after sunset yesterday at the Saddam Hussein International Airport - the first time the run-down near deserted airfield had been opened for a UN flight since the Gulf War.
Mr Annan was met by a delegation led by the Deputy Prime Minister, Mr Tariq Aziz, and driven straight to a luxury government guest house by the river Euphrates which will be his base for the duration of the talks.
He was due to consult with UN officials last night then have a one-to-one meeting with Mr Aziz this morning followed by negotiations between UN and government delegations.
Following those discussions, UN officials say they have been led to believe that Mr Annan will meet President Saddam but they say that meeting has not been guaranteed.
Meanwhile, Iraq could more than double the amount of oil it sells to buy food and medicine for its people under a resolution approved yesterday by the Security Council, Britain's UN ambassador, Mr John Weston, said.
The 15-member council agreed to increase from $2.1 billion to $5.2 billion the amount of oil Iraq can sell every six months under the UN oil-for-food plan.
As the council debated the plan, Iraq's deputy ambassador, Mr Saeed Hasan, said Baghdad couldn't pump that much oil. "The distribution plan will reflect the real quantity which Iraq can export, which is $4 billion," he told reporters.