Iraq was now in a mood of total defiance with both the capability and the will to resume weapons construction, he said.

"It's a fair assumption that they might be doing that but I don't know because we're not there and we can't see," Butler told ABC Radio.

The outspoken Australian diplomat, who has been accused by Iraq and its allies of doing the bidding of the United States, said inquiry panels set up by the UN Security Council would look into Iraq's disarmament obligations.

"They will examine the situation and report to the Council by the end of March and the council will then make up its mind what it will do and what it will propose to Iraq by way of getting us back in and... back on the job."

Butler, due to step down in June as head of the UN Special Commission (UNSCOM), said suggestions by Iraq that he was responsible for a breakdown in talks had nosubstance.

His weapons inspection team withdrew from Iraq late last year after Baghdad refused its cooperation, triggering the four-day Operation Desert Fox by US and British bombers.

"They have sought to frustrate the work of the Commission from the beginning," he said. ``I presented to them about a year ago a final list of disarmament items they had to meet under the law, not my say so, but the law laid down by the Security Council."

But Iraq had chosen instead to throw UNSCOM out.

"What that makes me think, and many agree, was that our list was right. We were on the verge of taking away their last remaining weapons of mass destruction capability and they decided they didn't want us to do that."

"They are in a mood of total defiance at the moment and that's serious."

He said construction of a weapon of mass destruction required three ingredients -- the material, the knowhow and the will.

"Their track record is such that the last piece is absolutely in place. They decided to do it over and overagain in the past. There's every reason to think that they may have made that decision now.

"The material, yes they have some of the relevant material. The knowhow? Absolutely."

Butler, here to attend an international lecture on weapons of mass destruction, admitted the job had taken a heavy toll of him, but he did not regret it.

``UNSCOM has had a fantastic track record. We've really taken away a great deal of Iraq's weapons of mass destruction capability. But the job's not finished and that is something I'm concerned about."