Former Iraq minister denies graft

Shaalan took his post after the June 2004 handover of power

The former Iraqi defence minister, Hazem Shaalan, has dismissed allegations that he helped embezzle more than $1bn of military funds.

Mr Shaalan told the BBC he had in his possession a report by British and American officials on the Defence Ministry's budget that would clear him.

Iraqi authorities have issued arrest warrants for 27 senior officials from the US-backed interim government.

The money was allegedly taken from the defence ministry to fund corrupt deals.

Sub-standard equipment was purchased that seriously impaired the fight against insurgents, it is reported.

Warrants have also been issued against the former labour, transportation, electricity and housing ministers.

'Baseless lie'

Mr Shaalan told the Associated Press that he plans to fight the allegations and sue four Iraqi officials for a "baseless lie which aims at undermining my reputation and standing".

The former defence minister, who has been in Britain for two weeks, has accused the current Iraqi government of trying to discredit him because of his anti-Iranian stance.

In an interview with Qatari al-Jazeera TV on Wednesday, Mr Shaalan alleged that the decision to arrest him was prompted by pro-Iranian members of the cabinet.

Many of the parties in the ruling United Iraqi Alliance were based in, and funded by the Islamic republic during Saddam Hussein's rule.

"There are some parties within the alliance who are trying their best to drag Hazem Shaalan into a political battle that does not concern him, for no reason other than the fact that Hazem Shaalan spoke loudly about Iran; and that is the truth," he said.

"Through the institutions of the state, Iran has currently penetrated every structure of the state of Iraq."

Missing funds

Ali al-Lami of Iraq's Commission on Public Integrity said the authorities were working with international police to seek the arrest those suspects, including Mr Shaalan, who are believed to be abroad.

"If they are outside Iraq it should be Interpol who brings them back," he said.

The government of interim Prime Minister Iyad Allawi took office in June 2004 when the US-led coalition handed over sovereignty 14 months after invading Iraq.

"It is nearly 100% of the ministry's procurement budget that has gone [missing]," Finance Minister Ali Allawi was quoted saying in the Independent newspaper last month.

The money was reported to have been siphoned abroad in cash and used to buy overpriced outdated equipment in a money laundering scam.