CANBERRA -- Iraq urged Australia on Tuesday to reconsider its "offensive and hostile" stance or lose out on more trade, Reuters said.

It warned Canberra its strong support for a possible U.S. attack could cost it friends throughout the Middle East.

The comments by Iraq's Ambassador to Australia, Saad al Samarai, came after the Australian government expressed its support for a possible U.S. strike against Baghdad because of Iraq's ceaseless search for weapons of mass destruction.

In retaliation, Iraq has threatened to halve its annual 2.4 million tons of wheat imports from Australia, worth about A$800 million (U.S.$430 million). It has also cancelled plans to order another 500,000 tons of wheat.

Samarai said Iraq was waiting for the Australian government to review its hard line. It was puzzled by the unprovoked hostility, but there was a limit to its patience, he said.

"If the Australian government does not reconsider its position against us, we will put Australia on the blacklist," Samarai told Reuters in an interview in the Iraqi Embassy. "Then the governnment will sacrifice its interest in Iraq and perhaps in all the Arabic region."

Iraq is a major buyer of Australian wheat under the UN-sanctioned oil-for-food program, which was introduced after the Persian Gulf War and allows Iraq to sell oil to pay for imported food, medicines and humanitarian supplies.

Samarai said Baghdad could not understand why Australia was jeopardizing more than 50 years of friendly relations with Iraq to back the United States more strongly than any other country.

____________ Rambo Rhetoric ____________ Accusing Baghdad of developing weapons of mass destruction, President George W. Bush has branded Iraq part of an "axis of evil" along with "terrorist allies". His stated policy is to oust President Saddam Hussein.

"Please stop your offensive and hostile policy against us," said Samarai, who took up his position in Canberra in early July. "There was no conflict in our relationship before, so why do this? It is not useful to be more American than the Americans."

The loss of trade has sparked a bitter political feud within Australia, with the main opposition Labor Party and leading wheat-industry figures questioning the government's "rambo" rhetoric.

But Conservative Prime Minister Howard has refused to tone down his comments, and so has Foreign Minister Alexander Downer.

Howard says he wants people to talk about the issue ahead of a possible parliamentary debate on joining any U.S. action.

"Our position is that we want the Australian public to be aware of the possibility -- indeed, as I put it, on the balance of probabilities -- that the Americans will get involved in some action against Iraq," Howard told reporters on Tuesday. "If that were to occur, there would well be a request from the Americans to Australia for assistance."

Center-left Labor leader Simon Crean accused the government of using inflammatory language. Instead Australia should pressure Saddam to give access to international arms inspectors to ensure all weapons of mass destruction had been dismantled in Iraq, the Labor leader said.

"Together we should be insisting behind the UN mandate on the weapons inspectors going back in," Crean told reporters. "What I don't support is a fool as a foreign minister mouthing off, costing the country money in lost wheat exports.