Britain is stepping up preparations to join any U.S.-led war on Iraq, defense sources said, but a walkout at an Iraqi opposition meeting signaled possible fresh dangers if President Saddam Hussein is ousted. The United States and Britain have already made clear they see holes in Iraq's weapons declaration to the United Nations and the White House has warned that Baghdad would not get a second chance to come clean over any arms of mass destruction.

Iraqi opposition groups seeking to form a common front failed on Tuesday to overcome rivalries, with some delegates walking out of a London meeting warning of possible civil war if they were sidelined in any new government.

The conference, organized by six parties recognized by Washington and attended by 330 people from dozens of exiled groups, ended with calls for a federal democracy in Iraq.

A 61-member committee was formed to help fill the power vacuum if Saddam is toppled, but the conference failed to bridge differences.

"If Sunnis do not have enough representation in a future government of Iraq, then the country risks civil war," said Ihsan Abdelwazir, spokesman for the Islamic Movement, a group of Kurdish and Arab Sunni Muslims based in northern Iraq.

Around 30 delegates walked out of the conference, Abdelwazir said. They were later joined by members of Islamic Wifaq, a Shi'ite Muslim group based in Damascus, supporting the walkout.

GOLD PRICES UP DOLLAR DOWN

The United States and Britain have made no secret of getting ready for possible war.

Gold jumped to its highest level in more than 5-1/2 years and the dollar slid to a three-year low against the euro in signs the markets believed war was looming larger.

The defense sources in London said Britain had put some troops on short notice for possible war, speeded up orders for desert equipment and placed ships on stand-by.

Military experts suggest the best time for desert combat is from December to March, the Gulf winter months. A risk of chemical attack, prompting soldiers to wear bulky protective gear, makes the prospect of anything later unwelcome.

Italy said on Tuesday it would let the United States use its air space and military bases if there was a war against Iraq. It said Washington had contacted Rome about support.

BLIX TO ADDRESS U.N. SECURITY COUNCIL

Chief U.N. weapons inspector Hans Blix is due to make a presentation to the 15-member Security Council on Thursday. The five permanent members -- the United States, Britain, Russia, France and China -- already have copies of the declaration. The 10 rotating members were given excerpts on Tuesday.

U.N. arms inspectors widened their search to Iraq's northern province of Mosul on Tuesday, but have found nothing untoward since returning to Baghdad last month after a four-year absence.

PHOTO CAPTION

British Royal Marines train aboard the Royal Navy Destroyer HMS Cardiff, 30 miles south of the coast of Iraq December 17, 2002. (Stephen Hird/Reuters)