The discovery of a banned weapons system on the eve of Hans Blix’s crucial presentation is tantamount to the inspectors finding a “smoking gun” — even though it was declared by Iraq to the UN as a legal programme.

Diplomats said the announcement would strengthen London and Washington’s case that Iraq was in “material breach” of UN demands and help the two allies to win support within the Security Council for a new resolution authorising the use of force.

The finding is also certain to provoke a confrontation when inspectors ask the Iraqi armed forces to surrender the banned missiles for destruction just as the country is preparing for an American attack.

A panel of independent experts ruled that the Iraqi missiles could fly beyond the permitted 150km range and Dr Blix will declare the al-Samoud 2 missile a proscribed programme. But Mohammed Aldouri, Iraq’s UN Ambassador, insisted that the al-Samoud 2 missile system flew within the permitted range, and the Russia’s Deputy Foreign Minister said the report was inconclusive. He described it as a technical matter rather than a violation.

Any indication in Dr Blix’s report that Iraq is in breach of its obligations under the Security Council’s Resolution 1441 will almost certainly prompt Britain and the US to bring a war resolution to the Council in the coming days. Washington hopes that Dr Blix’s report will be sufficiently damning to stop France, Germany and other reluctant Council members blocking such a resolution.

At the same time, however, America is canvassing the possibility of President Saddam Hussein and his top lieutenants going into exile. Colin Powell, the US Secretary of State, said that would “avoid a lot of problems”.

American officials have long encouraged Saddam to step down to avert war, but General Powell’s remarks yesterday were the clearest sign that Washington was actively pressing the matter. “We are not only discussing it, we are in touch with a number of countries that have expressed an interest in conveying this message to the Iraqi regime that time’s up and one way to avoid a lot of suffering is for the regime to step down,” General Powell said. “It would ultimately require some kind of United Nations participation in order to make sure that we can do it in a way that would actually entice him to seek asylum.”

In a sign of the frantic diplomacy in the face of war, at least six foreign ministers, including General Powell and Jack Straw, will attend Dr Blix’s report tomorrow, when France, Russia and Germany are expected to argue in favour of bolstering inspections as an alternative for war.

Condoleezza Rice, the US National Security Adviser, has also visited New York for private talks with Dr Blix in an effort to toughen up his report. Dr Blix spent yesterday afternoon in a private meeting with the UN inspectorate’s advisory board, which has representatives of all the major powers.

Dr Blix sounded the alarm about Iraq’s al-Samoud 2 and al-Fatah missiles in his report to the Security Council on January 27, when he said that they “might well represent prima facie cases of proscribed systems”.

He revealed that the liquid-fuel al-Samoud 2 had been test-fired to a distance of 183km and the solid-propellant al-Fatah to a range of 161km — both beyond the UN limit. He also noted that the al-Samoud’s 760mm diameter was increased from the earlier version, in spite of a directive from the former UN inspector Rolf Ekeus in 1994 that Iraq limit diameters to 600mm. Dr Blix suggested that the missiles also violated a second letter from Dr Ekeus in 1997, which banned the use of engines from certain surface-to-air missiles in ballistic missiles.

Since then Dr Blix has provided more damning details in answer to Council members’ questions. Inspectors discovered that the al-Samoud 2 has exceeded the 150km limit in 13 of 40 tests and the al-Fatah has gone beyond that distance in at least eight test-firings.

Before making a final decision on whether the missiles contravened UN rules, Dr Blix convened a meeting of outside missile experts from Britain, China, France, Ukraine, Germany and the US on Monday and Tuesday. Diplomatic sources said that those experts determined that the al-Samoud 2 exceeded the 150km range, but that the capability of the al-Fatah remained an “open question”.

The experts also judged Iraq to be in violation of UN rules for repairing banned casting chambers for making illegal missiles and for building a new test stand that can test missile engines five times above the permitted thrust.

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