According to a statement issued by the Defence Ministry, three companies were involved in direct talks with the Iraqi military, which asked for "co-operation in the area of research and design and the production of devices for short-range missiles."

Iraqi missile battery - long-range missiles must be eliminated

"In the period between 1994 and 1996, several rounds of negotiations took place between representatives of the Iraqi Ministry of Military Industry and decision-makers in the Romtechnica public corporation, Giara and Aerofina on the issue of co-operation in the area of military technology," the statement said.

Reports of such co-operation were first broadcast by the US television network CNN on Sunday, but former Romanian government ministers implicated by the reports denied that Romania violated UN sanctions by supplying sensitive military equipment to Iraq.

Previous government implicated

The government statement said that in December 1996 - after the new government had come to power - the contracts and negotiations were halted, and an army general, two colonels and the chief responsible for procuring military equipment for the army were fired.

An attempt by Iraq to reactivate the contract earlier this year, apparently for long-range missile technology, was thwarted by Romanian, Israeli and United States intelligence agencies.

"From the start, the attempt to resume the commercial relations of 1996 was under the surveillance of the Romanian state's intelligence service, in co-operation with similar services of partner countries. The negotiations failed," the ministry statement said.

Iraq is required to eliminate long-range missiles, biological, chemical and nuclear weapons under a UN Security Council resolution adopted after the 1991 Gulf War. Iraq has insisted it has destroyed all such weapons.

Widespread corruption

Our Central Europe reporter, Nick Thorpe, says that corruption remains rife in Romania despite the Christian Democrat government's efforts to combat it.

In April, a multi-million dollar cigarette smuggling ring involving a part of the secret service was broken up. And a suspended prison sentence given to the director of a company found guilty of delivering large quantities of oil to Yugoslavia in defiance of a UN embargo has led to allegations that the courts, and even the prosecution service, are not immune from corruption.