Despite Iraqi claims to the contrary, the Iraq economy is weak and ill-prepared to withstand an economic blockade, the Middle East Economic Survey reported today. ``Iraq's financial position was precarious before the invasion and the ending of new hard currency flows will impose severe strains on the Iraqi economy very rapidly,'' said the respected weekly newsletter based in Nicosia. The newsletter disclosed that payments for Iraqi crude delivered even before Iraq's Aug. 2 invasion of Kuwait are being frozen. Payment is normally made by 30-day letters of credit. Iraq's economy depends almost entirely on oil. And the three outlets for Iraqi oil exports, pipelines across Turkey and Saudi Arabia, and shipment by sea direct from an Iraqi terminal at the head of the Gulf, have been blocked. The blocking of oil exports is part of a total trade embargo decreed by a U.N. Security Council resolution after Iraq invaded and then annexed Kuwait. ``Drawing together the available economic indicators, the clear indication is that the Iraqi economy has been deteriorating during the last year,'' the newsletter said. Iraq was becoming more dependent on outside funding after an expensive eight-year war with Iran. In the second half of 1989, a large increase was reported in short-term debt to Western industrialized countries. Also, last year cash aid to Iraq from Saudi Arabia and Kuwait, estimated at $2 billion a year during the war _ which ended in a cease-fire in 1988 _ stopped. In 1989, Iraq had trouble borrowing from commercial banks, according to newsletter. Of a total of $1.6 billion in loans, $1.5 billion was in unauthorized loans from the Atlanta, Ga. branch of the Italian Banca Nazionale del Lavoro. The Middle East Economic survey said it is unlikely that Iraq, even before the embargo, could have found significant untapped sources of new money. ``It is clear that at the present time the Iraqi economy is very vulnerable and that it has little leeway to withstand an economic blockade,'' it said. Iraqi President Saddam Hussein has claimed that Iraq can hold out against the embargo if it conserves supplies. ``Iraq's national wealth is abundant. ... Our supplies of essential needs and food stuffs is great,'' Saddam said in a message broadcast Sunday on Baghdad television. ``Victory is on our side and defeat is certain for the aggessors who have pinned all their hopes to their economic sanctions and to their forces and their useless fleets.'' However, in the same speech he indicated a concern about shortages. He asked Iraqi women not to hoard foodstuffs and to cut back on consumption.