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UNITED STATESThe special prosecutor's office said yesterday it is dropping its case against Oliver North. A federal appeals court had set aside the convictions in the Iran-contra case, saying prosecutors had to demonstrate that North's 1987 immunized testimony to Congress wasn't used against him at his criminal trial. Former national security adviser Robert McFarlane stunned prosecutors on the opening day of a hearing last week by saying his testimony at North's criminal trial was influenced by North's nationally tel evised appearances to Congress. EUROPE Swedish Prime Minister Ingvar Carlsson resigned Monday after his Social Democrats lost an election Sunday that swung Sweden to the right. Conservative Party leader Carl Bildt was widely expected to be given a chance form a new government with the victorious center-right coalition, which won 47.1 percent of the vote. The Social Democrats and its allied Leftist Party received 42.7 percent. A new government could take office next month at the earliest, after the legislature reconvenes on Oct. 1.... Fierce n ew clashes erupted in Croatia yesterday just hours before Lord Carrington, head of a European Community peace conference on Yugoslavia, was to arrive for crisis talks. Yugoslav media accused Hungary of shooting down at least one Yugoslav Air Force jet yesterday.... Leaders of Soviet republics met in Moscow under President Mikhail Gorbachev yesterday in an effort to agree on an economic treaty capable of saving the country from ruin this coming winter.

MIDDLE EAST AND AFRICA Kurdish peshmerga rebels captured more than 800 Iraqi troops in clashes last week in which around 20 people were killed and several dozen wounded, UN sources said.... Egyptian paper Al-Ahram said yesterday Arabs must cease guerrilla attacks against Israel to avoid giving the Jewish state an opportunity to sabotage Middle East peace talks.... Seven people were killed Sunday night in political violence in South Africa, but police also reported a sharp drop in fighting since black and white leaders signed a peace pact Saturday.

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ASIA AND THE PACIFIC The Foreign Correspondents Club of Beijing filed a letter of protest yesterday with the Chinese government over the expulsion from China of British journalist Andrew Higgins, of The Independent, saying he had reported in a "fair and accurate manner." ... Australia suspended the import of American pit bull terriers and other fighting dogs yesterday, a day after a bull terrier mauled a baby to death.... Mount Unzen in Japan spewed ash and smoldering debris down its flanks Sunday and yesterday, setting at least 110 buildings on fire and touching off forest fires. A more severe eruption was expected.... Vietnam's Communist government has returned 72 rice mills, nationalized after 1975, to their former private owners.

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