The Iraqi President, Saddam Hussein, has dismissed as a "joke" charges that Iraq is developing weapons of mass destruction.

The Iraqi leader said the claims that Iraq would produce such weapons and then pass them on to terrorists was a lie being spread by the United States and Britain.

Some say an attack on Iraq would destabilise the whole region

"The Americans and the British are saying that if Iraq is left on its own, then it will produce such-and-such weapons that might be used to serve terrorism," Saddam Hussein said while meeting Iraqi Atomic Energy Organisation officials, the official Iraqi News Agency reported.

"Such claims are something of a joke," the Iraqi leader was quoted as saying.

US President George W Bush has accused Baghdad of developing nuclear, chemical and biological weapons and has said that the US will use all the tools at its disposal to topple the Iraqi leader.

Talks between the United Nations and Baghdad over the return of international weapons inspectors to Iraq failed earlier this month.

Speculation about a possible US-led attack on Iraq to overthrow Saddam Hussein has grown in recent months.

The UN inspectors should return to Iraq and verify the situation

Amr Moussa, Arab League

The Iraqi leader's remarks on Tuesday came as the Secretary-General of the Arab League, Amr Moussa, warned that a major military operation against Iraq could destabilise the whole of the Middle East.

Mr Moussa said the region's stability was already under constant threat because of the conflict between Israel and the Palestinians.

He said that an attack on Iraq would only heighten tension by provoking public opinion.

"The UN inspectors should return to Iraq and verify the situation," Mr Moussa said.

"The Iraqis have not rejected that proposal, they are negotiating the terms and certain points of clarification."

But the calls for weapons inspectors to return were dealt a blow by remarks from the former UN chief arms inspector in Iraq, who accused the US of manipulating the mission.

Swedish diplomat Rolf Ekeus, speaking on Swedish Radio, said the US had sought information about how the Iraqi security services were organised - and on the whereabouts of Saddam Hussein.

UN arms inspectors pulled out of Iraq at the end of 1998, before US-led air strikes, and the Iraqis have refused to allow them back.