Kuwait, Tuesday

DEFENCE Secretary Malcolm Rifkind signed a statement of intent with

Kuwait today which he said showed ''the interest and enthusiasm of the

Kuwaiti Government in purchasing British defence equipment''.

The document, signed for Kuwait by Defence Minister Sheikh Ali Sabah

al-Salem al-Sabah, would open the way for detailed negotiations, Mr

Rifkind told reporters.

British Challenger tanks have been competing with US M1-A1s this

summer for a contract expected to involve 300 to 400 tanks. Diplomats

said Kuwait may still take several months toplace its order.

Mr Rifkind declined to say what or how much Kuwait might buy, but

said: ''I am confident that at the end of the day the strengths of the

Challenger tank will be very well recognised.

''The British Government believes it is a superb tank. That is why we

are buying it for our own requirements.''

Arms purchases would fall under a British-Kuwait defence co-operation

pact signed after the Gulf War.

Mr Rifkind, making his first trip through Gulf states as Defence

Minister, arrived after visiting Saudi Arabia yesterday.

He told reporters the Saudi Government had shown its commitment to the

second phase of its huge Al Yamamah defence procurement contract.

He declined to list the equipment that the second phase would include

except to say the Saudis had expressed a serious interest in British

Aerospace's Tornado aircraft.

Press reports have said the second phase could be worth a total of

around #10 billion.

Mr Rifkind, who winds up his tour with a visit to Bahrain tomorrow,

said that Iraq continued to pose a threat.

''Saddam Hussein has not yet lived up to his obligations under the

UN's Security Council resolutions,'' he said.

''The UK is determined that he should be brought to respect the

authority of the UN.

''We have no argument with the Iraqi people -- only with Saddam's

regime which so abuses its own people and defies the UN. It is not our

aim to see Iraq dismembered.''--Reuter.