The suburbs of Baghdad. The night after Saddam's referendum. At last you have managed to sneak away from your ministry of information heavies and wander the streets alone. Baghdad used to make you think of the mystical east. Hah! The buildings of this Paris of Mesopotamia sag into the ground like elderly men on life-support machines. Pavements end inexplicably in mid-flow, petering out into haphazard piles of rubble. Shops operate out of shells which wouldn't survive heavy rain. It doesn't even look like a place that was once beautiful: its porridgey concrete buildings would be an eyesore even if they were brand new. This isn't Aladdin's cave; it's Stevenage 50 years after a nuclear holocaust.

The wind is blowing so fiercely that you realise that something must be wrong. You notice that the streets have emptied as you walk; everyone seems to have retreated into their homes. The wind is really hurting you now; you realise it is a sandstorm. Just for effect, thunder claps in the distance. You decide to head back to your hotel. Now, was it that way at the roundabout or ...

A 1980 Oldsmobile pulls up and a bearded man in his 50s barks, "Meester. Get into the car." His car radio fills the street with the sound of referendum results from across the country. One hundred per cent, one hundred ... You remember that Baghdad is the city that finished off even Alexander the Great. The sand is burning your eyes. You have nowhere else to go. You cross your fingers, bid farewell to life and get into the car.

It is at moments like this that you question the wisdom of taking a package holiday in Iraq.

It all began with a phone call to a man called Geoff Hahn, who runs a firm called Hinterland Travel. "I am the only person now running tours of Iraq," he explained. "The Iraqi government allows me to bring people in because I've been visiting the country since the 60s. They know I love the people there, you see. Of course, I can't guarantee it'll be 100% safe ..."

I was rather miffed that nobody tried very hard to talk me out of going. The last time a war kicked off in the Gulf, all the western tourists were seized and had to be rescued by Ted Heath. It might seem foolish to place my life in his pudgy, liver-spotted hands, but my granny just sighed and said, "Oh, well. At least if you're taken hostage you might finally lose some weight." I asked my father if he would campaign for my release. He tutted and said, "I'm very busy at the moment you know ..." One of my best friends said, "You simply must go. I mean, who was Terry Waite before he got seized in the Middle East? Nobody. It's the best possible career move."

So it was in a somewhat sullen mood that I arrived in Heathrow for a 6am flight to Damascus, the easiest place from which to drive to Iraq. Twenty-two people had, it turns out, booked with Hahn to spend 18 days in sunny, relaxing Iraq. First, I met Julie and Phil. They seemed an almost comically suburban couple: polite, a little posh, all golf jumpers and floral smocks. But then Phil mentioned that his last holiday had been to North Korea. "Yeah, I've been twice since they opened the borders to tourists. I'm a bit of a celebrity there now. People come up to me in the streets and say, 'Why have you come to our country twice?'."

The group had a handful of people like Phil, risk-takers craving a change from Marbella and some amusing dinner-party anecdotes. Sean, a 36-year-old New York restaurateur and multimillionaire, was clearly in this category. He lives a couple of blocks away from Ground Zero and witnessed the attack on the Twin Towers, but he appeared to be America's biggest peacenik. "If I was going to Iraq to shoot a bunch of people, everyone back home would say I was a hero. But because I'm coming to hang out with the people and see what they're like, they think I'm a suspect character."

He believes that the US and Iraq are morally equivalent: "You can't say the US is any better than Iraq. We have no right to lecture anyone, ever," he insisted, chewing his gum.

Then there were the hardcore archaeology fiends. The whole trip was ostensibly a tour of Iraq's archaeology sites, because they don't let you in if you say you are only interested in stocking up on Saddam memorabilia. One Christian couple wanted to check out ancient biblical sites; another was retracing the footsteps of an archaeologist grandfather.

Then there was Hannah. How to explain her? A frightfully well-spoken Englishwoman in her early 50s. When we first met, she dispensed with the small talk to say: "I think Saddam is a great man and the USA is a great big global bully. My theory is that he should be given Kuwait. It's perfectly logical if you look at the map."

"I think he's rather handsome too," she went on. "Every woman does really. I'd rather like to inspect his weapon of mass destruction myself." Sorry, what was that you said about ... "Oh, people say how can you say that, but I say, how can you support Bush when he is about to murder so many Iraqis? Hmmm? We must show our solidarity with Saddam."

With this group of amiable maniacs, I boarded the flight to Damascus. I found myself sitting next to an elderly Syrian man. He asked where I was going and when I told him, and explained that we were tourists, he suddenly erupted, Vesuvius-like, into gales of laughter. His tiny frame shook and his eyes poured with tears. He turned to the other people on the plane and explained to them in Arabic. They roared with laughter too. Once the noise had died down, I asked what was so funny. The old man said, voice cracking again at the hilarity of it all, "You will die. You will all die." And the laughter burst forth again.

As you near the Iraqi border from Syria, you begin to get a sense of the land you are hurtling so foolishly towards. One guidebook describes the Iraqi desert as "so desolate and uninviting that even a rattlesnake would feel lonely there". The scenery is so utterly barren for so long that a sighting of a telegraph pole barely visible in the distance seems like an event on a par with the fall of the Roman empire. As you cross through into the no man's land between the Syrian and Iraqi border posts, there is a stark little green sign. It says simply, "Goodbye."

The first thing you see as you cross into Iraq is Saddam Hussein, smiling and striding purposefully towards you. The entire party suddenly rises as one, terrified. How can he possibly be here in person to greet us? But then you see another Saddam standing next to him, and another, and then you realise that Saddam appears to be everywhere. It's a classic Middle East phenomenon: the men carefully craft themselves to look uncannily like the leader. (There is one exception, which is just as well. If all Israeli men looked like Ariel Sharon, there would be a new six-minute war, in which the Israeli army failed miserably to waddle away from the incoming Arab hordes).

All the men under 60 are led off for an Aids test. Suddenly I have a vision of the doctor returning to me saying, "Well, there's some bad news and some good news. The bad news is, you are HIV positive. The good news is, that means you can't come into Iraq." But the clinic gives me my first taste of Iraq's administrative incompetence. The blokes enter in a random order, and the doctor doesn't even ask our names. The blood samples aren't even marked. So we pass peacefully through the border - and the rubble begins. Iraq is brimming over with rubble. For the first five minutes of driving, you assume that you are passing through a rubbish dump, but then you realise that two wars and endless poverty have turned the entire country into a rubbish dump. Even so, how many collapsed buildings can there be? I did not see a single patch of desert or a single street corner in two weeks that did not have its own pot-pourri of scattered brick, stone and dust. Where on earth has it all come from?

After another seemingly eternal drive, Baghdad finally appears as though rising by sheer force of will from the desert. It seems strange to see people hurrying about the streets carrying shopping, smoking water-pipes, laughing, dreaming - living life. The novelist Amos Oz once said of the Middle East that "even on the side of a volcano, life goes on", and he is right. But it's not quite life as normal. There are cars on the road that have bits literally dropping off of them. One of the effects of UN sanctions has been that it is impossible to get new car parts - so people are driving weird clapped-out wrecks that no longer fit the strict definition of cars; motorised prams, perhaps. The street art towers over the regulation neo-Arab brutalist architecture. A huge concrete symbol of unity looks rather like a malformed testicle. A whopping statue of Saddam dressed as the Muslim warrior Saladin seems a tad inappropriate because Saladin was a Kurd, and Saddam has a problem with Kurds.

Our first full day in Baghdad was pretty frustrating. The Baghdad Museum has begun to evacuate its most important exhibits, and clay pots are not my priority on this trip. I decided to buy a guidebook to the museum anyway. It turned out that they were locked in a glass cabinet. It took the staff 10 minutes to find the key for the key drawer, which contained the key for the cabinet in which the guides were - except the guides marked "English" are in German. Ahmed, one of our Iraqi security minders, wandered up and whispered, "Do not buy this book. You can buy it cheaper elsewhere." What, the same book? "No. Different. But the same." I began to wonder if Iraq was created not by Ballard but by Kafka.

As we darted from museum to ancient monument, I snatched every moment I could with "real" Iraqi people. As we stocked up with petrol, I wandered into a shop selling confectionery. When I said I was from England, the shopkeeper - in his early 30s, at a guess - hugged me. I think he thought our presence guaranteed that there would be no bombs that day. If only. I lied and said that his city is beautiful. "Ah, it was beautiful once. Before 1990 and sanctions. Now it is ..." He looked around him and shrugged. "Now we wait. November, December, the bomb come ... You go to work in the morning and you do not know if you will come home. But we work. What else can we do? We work and we wait for bomb."

At times like this, I began to experience what I quickly identified as my John Pilger moments. If I didn't know better, I would swear that Saddam Hussein had deliberately scattered the most dignified, stoical Iraqis and - especially - the cutest doe-eyed children in our paths, and trained them to say lines riddled with pathos about sanctions. As I looked at these kids on the streets, it was tempting to work up a satisfying rage about sanctions and piously denounce all this as the work of my own government. Instead I just took a valium and lay down for a few hours.

But the more time you spend in Iraq, the harder it is to take the Pilger line of blaming almost all the country's woes on sanctions. You only need to look at how the Hussein regime uses the resources presently coming into the country to realise that lifting sanctions would scarcely help Iraq's poor. In among hideous, uninhabitable shanty towns crammed full of people, Saddam's palaces (all 65 of them) glisten smugly like fat diamonds. We ate one afternoon in the Al Ghouta restaurant in Baghdad, a plush venue which could easily be in Britain were it not for the pictures of Saddam on the walls.

Saddam's westernised elite hang out here: un-chadored women mix with men in Savile Row suits, and nobody spares a glance for the hungry children outside.

In fact the two most hideous things we witnessed in Iraq had absolutely nothing to do with sanctions and everything to do with Saddam. The first was the plight of the Marsh Arabs. For 5,000 years, the marshlands of southern Iraq were inhabited by these proud, self-sufficient people. They lived on islands constructed of reeds and survived by farming and fishing. Yet Saddam decided that the Marsh Arabs were politically troublesome, and that he wanted their ground for military purposes. He set about draining the life from the marshes, destroying the entire ecosystem and the way of life based on it.

Hinterland ran tours of the Marsh Arab lands in the 1980s; now there is nothing to see. In Sumawi in southern Iraq, we drove through the pitiful concrete slums into which the Marsh Arabs have been "relocated". This is where God would insert the tube if He was giving the world colonic irrigation. A couple and their four children invited us into their home for tea. It was impossible not to notice that they were living in a hut about the same size as my garden shed, in the middle of the desert.

Their traditional skills were now worthless, they had barely any money, yet they insistently refused to accept any cash compensation for the tea. As we left reluctantly, I noticed that they too had been forced to hang a picture of Saddam - the man who had destroyed their people - on their Spartan wall. The second most upsetting thing on our trip was a visit to a museum. I asked Mohammed - our other Iraqi minder - to take us to the museum in Basra marking Iraq's horrific eight-year war with Iran. The museum is called - in a David Irving-like parody of history - The Museum for the Martyrs of Persian Aggression.

As we wandered around, looking at the grim exhibits, one of the soldiers on duty guarding the museum told me that three of his brothers died in that war. Everybody in the country lost somebody - yet it is almost impossible to get anybody to talk about it. They speak in a small number of bloodless stock-phrases.

After more than 10 such encounters, it suddenly hit me that the people of Iraq are not even allowed to grieve their huge numbers of dead in their own way. They are permitted only a regulation measure of state-approved grief, which must be expressed in Saddam's language: that of martyrdom and heroism, rather than wailing agony about the futility of a war which slaughtered more than a million people yet left the borders unchanged and achieved nothing.

Saddam is a constant, everyday presence in Iraq. It is impossible to convey just how often you see his image, or the effect this has on your psychology - never mind the effect it must have on the relatives of the three million who have been murdered directly by the regime since Saddam's party came to power in 1964. In the areas of the south which rose in a failed attempt to overthrow Saddam in the early 1990s, the images of the president become markedly more threatening. He stands stern-faced against an inferno-like red backdrop. Bullet holes remain ominously in the sides of buildings, a constant reminder of the price of dissent.

It is obviously very difficult to get Iraqis to express their feelings about all this. For the first few days I was there, I blundered about asking fairly direct political questions, which caused people to recoil in horror. Only after this - and a blunt telling-off from Ahmed - did I realise that I had to speak more obliquely. Talking politics in Iraq is like a magic-eye picture, where you have to let your brain go out of focus, not your eyes. One very distinguished old man in a Mosul souk welcomed me warmly and told me how much he had loved visiting London in the 1970s. After much oblique prodding, he said warmly, "I admire British democracy and freedom." He held my gaze. "I very much admire them." He added, "We do not know what is coming. The news we receive here is ... unclear."

A group of students in a cafe in Mosul were eager to know - in hushed tones - if it was possible to "continue their studies" in Europe or America. Equally, many people asked quite genuinely "why your government hates the Arab world". Again and again, it was startling how little anger there was towards Brits and Americans. Sean walked about rather indelicately wearing a New York City T-shirt and Nike trainers, yet received nothing but friendly hellos and waves in Baghdad. In Basra, one person asked nicely where he was from, and when he said the US, the man recoiled and said "Goodbye, sir." That was the full extent of the aggression we received from the Iraqi people.

Except - I suddenly feared, looking up - now that I had clambered from the dust storm into an anonymous car, perhaps I was finally going to get the brunt of all that pent-up hatred. The driver was expressionless. Trees were falling like matchsticks across the town, and the radio still blared on: one hundred per cent, one hundred ... The driver lit up a fat cigar, and offered it to me. "What hotel, meester? Where would you like to go?" He smiled sweetly.

My shoulders finally unclenching, I asked him just to drive around the town for a while. The sandstorm probably made that unsafe, but - what the hell - I was in Iraq, and figured that a little more risk wasn't going to hurt much. I handed the cigar back and the driver merrily puffed at it. Baghdad is a city that smokes. The kids smoke. The adults smoke. The elderly smoke. And they don't go in for any low-tar rubbish either. After a while, the storm died down and the streets began to fill up again. If New York is the city that doesn't sleep, Baghdad is the city that dare not sleep. Even late into the night, people scurry around, smoking, always smoking.

The following correction was printed in the Guardian's Corrections and Clarifications column, Thursday December 5, 2002

The Ba'ath party, Saddam Hussein's party, did not come to power in 1964. It first came to power, but only for a few months, after a bloody coup in 1963. The Ba'ath regime did not really begin until it returned to power in 1968.