UNITED NATIONS (AP) _ The U.N. official in charge of overseeing the embargo on Iraq said Thursday that nations were free to release Iraqi assets for the battered nation's use to buy food and humanitarian supplies.

Peter Hohenfellner, chairman of the U.N. Sanctions Committee and the Austrian ambassador, said he planned to advise member nations they are free to release some Iraqi funds under the permanent cease-fire resolution passed by the U.N. Security Council on April 3.

His announcement was a partial response to Iraq's request that U.N. members holding its assets free $1 billion so Saddam Hussein's government can buy food and emergency aid. Hohenfellner's committee has refused to issue a blanket order unfreezing assets.

The April 3 cease-fire resolution permitted food and humanitarian supplies to pass through the U.N. economic embargo which has been enforced since shortly after Iraq invaded and occupied neighboring Kuwait on Aug. 2.

The Sanctions Committee has not allowed Iraq to resume oil exports. Hohenfellner said he was seeking information from Iraq about its gold reserves, currency and other resources at home before allowing the sale of oil as a last resort.

Iraq has asked to be allowed to sell $942.5 million in oil to buy food and relief materials.

Diplomats also said Thursday that Western officials were preparing a draft resolution to reject Iraq's request for a five-year moratorium on reparations for damage resulting from the invasion of Kuwait and the Gulf War.

Meanwhile, the chairman of the U.N. commission to disarm Iraq rejected claims by a Finnish official who said the plan to force Iraq to get rid of its chemical and biological weapons was unworkable.

Marjatta Rautio, Finland's representative on a 20-member commission charged with finding and destroying the Iraqi arsenal, was quoted Tuesday as saying the U.N. program was ''absolutely unrealistic.''

But the commission chairman, Swedish disarmament expert Rolf Ekeus, told a news conference the Security Council plan ''is a sound plan and we have no reason to think it will not work.''

His commission has been meeting this week in technical groups to draw up by May 18 a blueprint for locating and destroying the weapons, as well as for future monitoring.

He said he was seeking intelligence from other nations to double-check the amounts and locations of Iraqi arms stocks.