OTTAWA — President Bush, on a whirlwind journey of postwar diplomacy, cautioned Iran on Wednesday against seizing Iraqi territory in the wake of the Persian Gulf War. “That would be the worst thing they could do,” he said.

At a news conference with Canadian Prime Minister Brian Mulroney, Bush said it was “impossible to have normalized relations” with Iraq as long as Saddam Hussein remains in power. Yet he said he was concerned about instability in the region might result from the internal unrest in Iraq.

Saddam’s forces have been battling for control of Iraq in scattered locations, with Republican Guard units reportedly fighting with Kurdish rebels and other disaffected parties.

The president cautioned Iraq not to use its combat helicopters “for combat purposes inside Iraq.”

Bush touched down in Canada on the first leg of a five-day trip that also will include sessions in Martinique with French President Francois Mitterrand and in Bermuda with British Prime Minister John Major. Canada, France and Great Britain all committed forces to Operation Desert Storm, the allied campaign that routed Iraqi troops from Kuwait.

Aside from talks on the Persian Gulf War, Bush and Mulroney signed an treaty to reduce acid rain and agreed to cooperate in reducing other air pollutants.

Their joint news conference was dominated by questions about the Persian Gulf, and Bush’s determination to seek peace among Israel and its Arab neighbors.

Bush said Secretary of State James A. Baker III had found an improved diplomatic climate on his trip to Middle Eastern capitals, He quickly added, “I can’t tell you about radically shifting positions.”

The president said the threat to Israel is “significantly diminished because of what happened to Iraq,” and that he hopes it means “that we won’t have ever increasing arms sales” to the Jewish state.

Bush said he was seeking an international effort to control arms sales in the Middle East. “The United States doesn’t want to start going it alone and I don’t think Canada wants to start going alone, he said.

As for Yasser Arafat, Bush noted the leader of the Palestine Liberation organization “chose wrong” when he backed Saddam in the Persian Gulf crisis. “He diminished his credibility in the Arab world.”

Bush was careful to say he had no evidence that Iran was trying to seize Iraqi territory as forces loyal to Saddam battled rebels. But he was emphatic in warning: “Iran knows our view … that grabbing territory would be counterproductive and I take this opportunity to suggest that that would be the worst thing they could do.”

As for Saddam, Bush said, “It is hard to see how Iraq with him at the helm can rejoin the family of peace-loving nations.”

The president said damages wrought by Iraq’s occupying forces on Kuwait will be assessed. “Blame has to be put right squarely on his shoulders,” he said.

Bush is expected to visit the Middle East soon.

Asked about Mikhail S. Gorbachev’s chances for political survival, Bush noted that the Soviet president is under pressure from both pro-democracy and hard-line Communist elements. But Bush said it would be “imprudent for me to speculate on how he is going to master these problems.”

Earlier, at the treaty signing ceremony, Bush thanked Mulroney and the Canadian people for their role in liberating Kuwait and “for standing in partnership for the principles that give justice real meaning in the world.

“This victory has demonstrated the will and ability or law-abiding nations to work together to protect the weak from the aggressors.”

He said the acid-rain accord “is testimony to the seriousness with which both our countries regard this critical environmental issue.”

He recalled that Mulroney gave him “an earful” on the acid-rain problem when Bush, then the vice president, visited Canada in 1987.

“So now you see, I was listening,” said Bush.

“Pollution is never stopped by a line on a map. Progress begins when we act on the understanding that trans-boundary pollution requires cooperative global stewardship among all nations,” the president added.

The agenda for Bush’s meetings with Mulroney, Mitterrand and Major included arms proliferation, security in the Middle East, economic development and the Mideast peace process.

Mulroney is advocating the idea of a summit meeting, under U.N. auspices, to declare a political commitment to restrict the spread of weapons worldwide. White House press secretary Marlin Fitzwater said Bush shares Mulroney’s objective for a more stable Middle East but does not plan to halt all arms shipments to the region.

The U.S. view is that stability in the Middle East requires a balance of weapons in the region. The White House says there will be no cutoff to U.S. allies.

Indeed, the administration already plans to sell F-16 warplanes, “smart” bombs, cluster bombs and missiles to Egypt, and to provide new military aid to Israel, Saudi Arabia, Turkey and others in the region.

Bush’s diplomacy parallels the efforts of Baker, who has been touring the Middle East trying to sell Arabs and Israel on the formula that Israel relinquish occupied land in order to gain the acceptance by its Arab neighbors.

Despite differences in the past, France and the United States appear to be moving closer on Mideast policy. Foreign Minister Roland Dumas said France has eased its insistence on an international conference to resolve the Israeli-Palestinian dispute. The PLO has endorsed the idea, but it has been opposed by the United States and Israel.