THE GULF WAR: The International Front : In Washington

SECRETARY OF STATE James A. Baker III proposed a new Middle East Bank for reconstruction and development to collect funds from the region’s richest countries to rebuild Iraq, restore other war-ravaged areas and support programs in the area’s needy nations. But he told the Senate Foreign Relations Committee that aid to Iraq is unlikely as long as Saddam Hussein remains in power. The IRAQI EMBASSY remained open despite a Radio Baghdad announcement that Iraq has severed diplomatic ties with the United States and its allies. “We’ve had no official word from Baghdad, and we’re doing business as usual,” a spokesman said.