Iraqi troops south of Baghdad are armed with chemical weapons, Fox News has learned.

Senior Defense and other U.S. officials confirmed that intelligence reports indicate that Saddam Hussein's troops are armed with chemical munitions.

"The information is raw … and hard to confirm ... but we are seeing -- using different methods -- that Saddam Hussein has armed troops south of Baghdad with chemical weapons," one official said.

Officials say it's hard to tell how many of these weapons are being distributed, but the intelligence reports indicate that "some chemical shells" have been provided to troops.

Senior Defense officials say they expected the Iraqis to use these weapons, and they predict more movement by Iraqi troops in the South and the West in the next day or so.

Iraqi troops along the Kuwaiti border far to the south are in shooting distance of U.S. troops stationed there -- but the troops with the chemical shells are further north -- still in the southern no-fly zone, but south of Baghdad.

Saddam said Monday that Iraq once had weapons of mass destruction for defense against Iran and Israel, but it no longer holds them, according to the Iraqi News Agency.

"We are not weapons collectors," Saddam said in remarks during a meeting with a Tunisian envoy.. "But we had these weapons for purposes of self-defense when we were at war with Iran for eight years and when the Zionist entity (Israel) was, and it still is, a threat."

Iraq and Iran fought a ruinous 1980-1988 war in which chemical weapons were used.

"When Saddam Hussein says he has no weapons of mass destruction, he means what he says," Saddam said.

He also said his country had fully cooperated with U.N. inspectors seeking to verify that Iraq had eliminated its banned weapons.

"We have a real desire to rid our region and the whole world of weapons of mass destruction," Saddam said.

He then called on the United States to set an example by destroying its own weapons of mass destruction first.

President Bush has warned Saddam bluntly to disarm or face the consequences. Bush will give Saddam an ultimatum -- either get out of Baghdad or face a military thrashing -- in an address to the nation Monday night .

Fox News' Bret Baier and the Associated Press contributed to this report.