Powell wants to put Iraq in place, faces criticism from home.(Knight Ridder Newspapers)

WASHINGTON _ Secretary of State Colin Powell, with little opposition and surprising speed, has sharply reoriented U.S. priorities in the Middle East, putting Iraq and its Arab neighbors, not the Israeli-Palestinian conflict, at the center of American diplomacy.

Powell's proposal to scrap all but the military-related sanctions on Iraq is aimed not just at Iraqi President Saddam Hussein but at resuscitating a coalition of moderate Arab allies, U.S. foreign policy officials say. The Gulf War-era coalition built by President Bush's father has fallen apart, thanks to widespread opposition to the sanctions and the failure of the U.S.-sponsored peace talks to produce peace between Israel and the Palestinians.

The dim prospects for a peace deal give the Bush administration "a chance to focus on what needs fixing, which is the Iraq sanctions," said a senior State Department official, speaking on condition of anonymity.

But U.S. officials say Powell won quiet acceptance to pursue the "smart sanctions" proposal from most of the Arab states.

Powell now faces the challenge of selling it in Washington. Under the proposal, controls on most consumer goods and dual-use items (those with both civil and military applications) would be lifted, but tighter controls would be imposed on smuggling to prevent Iraq from acquiring weapons of mass destruction.

Congressional Republicans such as Rep. Henry Hyde, R-Ill., chairman of the House International Relations Committee, are skeptical of what they see as an easing of the pressure on Saddam. Many members of Congress want the Bush administration to undertake a campaign to overthrow Saddam, a sentiment shared by some Pentagon officials.

Others questions whether sanctions can be revitalized. "I wonder whether we can put the horse back in the barn. The sanctions regime and the international coalition against Iraq have completely unraveled," said Sen. Sam Brownback, R-Kan.