Iraq yesterday accused western aircraft of firing two rockets near its southern city of Basra in the first military action since Operation Desert Fox. The United States and Britain quickly denied any involvement.
Meanwhile in New York, the UN Security Council began consultations on the Iraq crisis, and in Western capitals political leaders struggled to bridge the sharp differences between their Iraq policies exposed by last week's US-British blitz.
Paris, Beijing and in particular Moscow criticised the attack on Iraq, launched after UN arms inspectors said Iraq had failed to co-operate with their search for weapons of mass destruction.
Iraq, denouncing an apparent renewal of the air offensive, said that four formations of jets violated the demilitarised zone between Iraq and Kuwait early yesterday and that hours later five formations returned and fired two rockets near Basra.
In Washington, a Pentagon spokesman said no US aircraft had fired rockets over Iraq and a British Defence Ministry spokesman in London issued a similar denial.
Baghdad launched its own diplomatic counter-attack, calling for a swift end to UN sanctions imposed in 1991, and rejecting any return to Iraq of the UN Special Commission (UNSCOM) arms inspectors.
While Washington and London maintained yesterday that the sanctions should stay in force until Iraq was verified free of weapons of mass destruction, Bonn proposed a phased lifting of sanctions linked to Iraqi disarmament, and Paris called for sweeping changes in the international community's Iraq policy.
Moscow, which expressed unusually fierce outrage over the US-British attacks and withdrew its ambassadors from Washington and London, said its ambassador, Mr Yuli Vorontsov, would return to Washington today.
However, a Foreign Ministry spokesman made it clear that it was up to Washington to take steps to patch up the biggest rift between the two former superpowers since the Cold War.
Interfax news agency said President Yeltsin had received a message from President Clinton offering an explanation for the air strikes and expressing the hope that they would not damage relations with Moscow.
In London, the British Defence Secretary, Mr George Robertson, said the air attacks had inflicted heavy damage on Iraq's military infrastructure.
"We know that we have done considerable damage to the war machine of Iraq," he told a news conference, clearly frustrated by reports from Baghdad suggesting the military infrastructure had escaped relatively unscathed.
In Paris, the Prime Minister, Mr Lionel Jospin, said France wanted to see a long-term surveillance system that would "detect and signal any resumption of the programme of arms of mass destruction" and monitoring of Iraq's finances to ensure Baghdad could not import arms or other banned goods.
Mr Jospin, expressing veiled criticism of the US-British air strikes, said the UN Security Council had to be restored to its role guaranteeing world peace "which some (countries) tend to by-pass or ignore".
But he played down French disagreement with Britain over the raids, saying this showed the need for the European Union to speed up its search for a common defence policy.
The Foreign Minister, Mr Hubert Vedrine, launched a round of telephone diplomacy, speaking to the UN Secretary General, Mr Kofi Annan, and counterparts in the US, Britain, Germany, Russia, Saudi Arabia, Portugal, Spain, Italy, Austria and Sweden.
Meanwhile UN relief workers were heading back to Baghdad to oversee humanitarian programmes in Iraq.
Under the oil-for-food deal with the United Nations, Iraq can alleviate the effect of sanctions by selling $5.2 billion of oil every six months to import food and medicine for its people.
Yesterday the United States said it was amenable to increasing the amount of oil Iraq can sell under the oil-for-food programme, a US official said. "Oil-for-food. . . would be the one area where we could see perhaps the possibility of more forward movement, particularly if the humanitarian report indicated there was a greater need for food," the US Under Secretary of State, Mr Thomas Pickering, told a briefing on US policy towards Iraq.
Mr Pickering noted that with the decline in the world price of oil, Iraq could not buy as much food at the same export level.
"I think that there's a possibility out there of expanding it if the (UN) Secretary General and his experts believe there is a need for expansion," he added.