Mubarak Offers Saddam Hussein Asylum Eds: ADDS 4 grafs at end to UPDATE with Iraqi reaction to Hussein speech and accusations that defector backed military action against Iraq's neighbors.

CAIRO, Egypt (AP) _ Egypt is ready to grant asylum to Iraqi leader Saddam Hussein if it will help resolve his nation's problems, President Hosni Mubarak was quoted Friday as saying.

Mubarak told the London-based Al-Hayat newspaper he was eager to head off upheaval in Iraq, a nation of 20 million people.

He said Egypt's door was open ``if Saddam Hussein's asylum to Egypt will solve the problem, instead of a bloodbath. Iraq's history is full of bloodbaths, and this threat is present there now.''

Egyptian officials said they knew of no recent requests for asylum from Saddam or any of his associates. But questions about the stability of his regime have been raised by the defection of two of his sons-in-law, including a former defense minister, Lt. Gen. Hussein Kamel al-Majid.

Shortly after arriving in Jordan on Aug. 8, al-Majid expressed his intent to work to overthrow Saddam.

The interview with Mubarak is to be published by Al-Hayat on Saturday. An advance copy of his remarks was made available Friday.

Mubarak, reiterating his opposition to outside forces toppling Saddam, extended his offer to the Iraqi leader at a time of escalating pressure on the Baghdad regime.

Iraq has been isolated by U.N. economic sanctions since it invaded Kuwait five years ago, and the United States opposes lifting the embargo while Saddam remains in power.

The U.S. ambassador to the United Nations, Madeleine Albright, said Friday that the Security Council was a long way from lifting the sanctions after learning Iraq planned to have a nuclear weapon ready by April 1991 and had missile warheads armed with biological agents.

In Kuwait, legislators hailed moves by Jordan's King Hussein to distance himself from the Iraqi regime. That could speed reconciliation between Kuwait and Jordan after a split triggered by the 1990 Gulf crisis. Jordan's large Palestinian population supported Saddam, who backed a Palestinian state.

In a speech Wednesday, King Hussein blamed Saddam Hussein's regime for Iraq's suffering and accused Saddam of repeatedly deceiving him and splitting the Arab world.

``The king's speech has an important positive aspect in that it condemns the invasion'' of Kuwait by Iraq in August 1990, independent legislator Ahmad al-Nassar told the Al-Qabas daily.

In its first reaction to the speech, Iraq denied allegations that it planned new attacks on Kuwait and Saudi Arabia and accused al-Majid of supporting such attacks.

An unidentified commentator on state-run Iraqi television said late Thursday that in October 1994, al-Majid ``was the only member of the Iraqi leadership who was calling for ... the occupation of Kuwait and the Eastern Province of Saudi Arabia.''

In an interview published Friday in the Saudi newspaper Asharq al-Awsat, al-Majid claimed Saddam had mobilized his forces for an attack on Kuwait twice since the emirate was liberated in February 1991.

A quick international military buildup dissuaded him last year, and the recent defections disrupted later plans, al-Majid said.