Washington -- As the military squeeze tightens around Iraq, Arab leaders and the European Union have quietly begun mobilizing last-minute initiatives to avert a U.S.-led war, according to American, European and Arab officials.

Arab envoys are talking behind the scenes about Iraqi President Saddam Hussein's political future, while the European Union announced plans Wednesday for a mediation mission to the Middle East early next month.

The prospect of success, at this advanced state of play, basically boils down to a single question: Would the Iraqi leader be willing to surrender power?

The Bush administration appears to consider that an option, several U.S. officials have said this week. After declaring that war is not inevitable, Defense Secretary Donald H. Rumsfeld said Tuesday: "The first choice would be that Saddam Hussein would pick up and leave the country tonight. That would be nice for everybody."

At the State Department, spokesman Richard A. Boucher said Wednesday, "It's an option that we would all hope he would take advantage of."

The response from Iraq, however, was a blustery and definitive "no way." A top Iraqi diplomat denounced the growing rumors as "nonsense" and a "canard" in a psychological war against Baghdad.

"I'd like to assure you that Hussein will continue to defend his homeland. He is one of the leaders who will never leave his country and will fight till the last drop of blood," said Abbas Khalaf, Iraq's ambassador to Russia.

"Hussein enjoys excellent health. He is in a determined mood, is in perfect control of the situation and believes in our victory," Khalaf was quoted as saying by Russia's Interfax news agency Wednesday.

The Iraqi envoy specifically denied reports that Hussein was considering Libya for exile — and that Hussein's elder son, Uday, had channeled $3 billion to the regime of Col. Moammar Kadafi in exchange for the family's political asylum.

Yet there are growing rumblings in Europe and the Arab world about Hussein leaving Iraq as a way to avert a violent showdown.

The Arab effort is still in its early stages, but several governments are determined to look for a way to avoid war and potential regional destabilization, envoys from the region said Wednesday.

"There is a feeling of panic and frustration in the region now, and we hope we will be given a chance to try something. We can't just sit still and not try to find a way out," said one Arab foreign minister. The talks are in such early stages that no country is willing to go on the record as being involved.

"The question is not who will take him, but will there be an offer that can satisfy both Saddam and the United States? Because the U.S. wants not just the man but the system to go. How do you work out an arrangement like this?" the foreign minister said. "And suppose he goes out. Who takes his place? Someone he chooses? That's not something the United States will accept."

But Arab diplomats also say Washington has not provided an acceptable "exit strategy."

"A way out depends on whether the U.S. can give us a strategy that we can go to Saddam and convince him. Just saying, 'Leave the country,' with no promise of anything in return, is not going to work," the foreign minister said.

Bush administration officials acknowledged Wednesday that they had not been given instructions to encourage Arab or European efforts to do anything beyond getting Baghdad to comply with U.N. weapons inspections.

The biggest obstacle is the issue of whether to hold Hussein accountable for war crimes and other crimes against humanity during his 23-year rule in Iraq, as well as in the 1980-88 war with Iran and the 1990-91 invasion of Kuwait.

To abandon Iraq, Hussein will want guarantees that he will not face extradition from exile for trial, Arab officials say.

The State Department is in the throes of building a massive war crimes case against Hussein and the top dozen Iraqi officials, but the issue is being revisited, according to U.S. officials.

Some quarters think that there should be flexibility on war crimes in order to peacefully force Hussein out — or at least to be seen as offering him an out. But others firmly believe that he must be held accountable for his documented use of weapons of mass destruction and the deaths of hundreds of thousands of people in Iraq, Iran and Kuwait.

The administration is also debating what Hussein might do if offered exile.

"Some say he's the ultimate survivor and will take whatever steps necessary to get out of this alive, believing he'll be able to go back someday because the American experiment in Iraq will fail. He's so convinced of his own abilities that he believes he's the once and future strongman that Iraq needs," one official said.

"We must expect the regime to attempt buying time for as long as it can — but dictators are known to value their lives, and their money, and we should not discount the possibility of him soliciting and accepting a refuge, if offered one, on the eve of the military campaign," said Barham Salih of the Patriotic Union of Kurdistan, one of two groups that run the autonomous Kurdish enclave in northern Iraq.

"Saddam has governed by the sword and he, like other dictators, must be trying hard to avoid dying by the sword, like the thousands upon thousands of his helpless victims," Salih said Wednesday in an interview in Washington.

But others say Hussein won't budge.

"Saddam believes he's more than the father of modern Iraq. He is modern Iraq, so for him to give up power to go into exile is highly unlikely," said Joseph Wilson, the last U.S. diplomat to meet with Hussein, in 1991.

The European Union effort, which will center on talks with seven moderate Arab governments and be led by Greek Foreign Minister George A. Papandreou, also is at an early stage.

"All hope for a peaceful settlement of the Iraq issue has not been exhausted," a Greek Foreign Ministry official said Wednesday. "The EU will encourage peace efforts up until the last minute." But European leaders are under pressure to find alternatives.

In France, one of the five permanent member nations of the U.N. Security Council, a poll published Wednesday in the newspaper Le Parisien found that 66% of the population opposes military intervention in Iraq. Those supporting a war dropped from a third to a quarter, with the remainder uncertain.

Times staff writer John Daniszewski in Moscow contributed to this report.