WASHINGTON (AP) _ The United States today proposed removing a U.N. ceiling on Iraqi oil sales provided the proceeds are used to purchase food and other humanitarian supplies for the Iraqi people.

Calling on Iraq to take advantage of the exemption to a 9-year-old Security Council trade embargo, State Department spokesman James P. Rubin said also that the process for approving food and pharmaceutical contracts would be streamlined and made virtually automatic.

The anticipated U.S. actions are designed partly to counter a campaign by Baghdad of accusing the United States of starving the Iraqi people through its support of economic sanctions.

Iraq is permitted to sell $5.2 billion worth of oil every six months provided the proceeds are used to purchase food, medications and other humanitarian supplies.

This is the ceiling that would be lifted if the U.S. proposal were accepted by the Security Council.

But it would not assure a better life for Iraqi children, pregnant women, nursing mothers and the elderly. According to U.S. officials, Iraq has kept large supplies of food and medicine in storehouses, refusing to distribute them to the needy.

``The United States would support eliminating the ceiling on funds from oil exports so that those funds can be used solely for humanitarian food and medicine,'' Rubin said.

``We would also support reasonable measures to streamline the U.N. contract-approval process, including automatic approval of food and medicine contracts,'' he said.

And yet, Rubin said, ``Unfortunately and sadly for the people of Iraq, the government of Iraq has chosen not to order important foodstuffs and medicines for its people. Furthermore, the government of Iraq has rejected donations of humanitarian goods from other countries.''

At the same time, Rubin emphasized this was not a lifting of sanctions on Iraq.

``It is an expansion of the humanitarian program known as the oil-for-food program. All present controls on the collection and disbursement of revenues generated by the sale of oil would remain in place,'' he said.