Fresh claims over Galloway

Labour was today plunged into confusion over maverick MP George Galloway as new charges were levelled about his dealings with Saddam Hussein.

The Daily Telegraph, which yesterday claimed Mr Galloway had demanded payment worth more than £375,000 in oil revenues from the Iraq regime, today produced a new document suggesting his request for more cash had been turned down.

Mr Galloway continued vehemently to deny all the charges as his lawyers prepared for legal action against the newspaper. But the row caught Tony Blair and the Labour Party machine on the hop.

The party's chairman, Ian McCartney, yesterday declared an immediate inquiry into what he called "extremely serious" allegations, an investigation which could lead to Mr Galloway's eviction as a Labour MP

By last night, however, the message had changed. Labour sources said that the party had not got the resources to conduct its own probe into the MP's relationship with the deposed Iraq regime. And they said that any verdict on Mr Galloway must wait for the outcome of court action, which could take many months.

The clear fear was that over-hasty action to expel Mr Galloway could provoke a grassroots backlash in his favour, as happened with Ken Livingstone, who was thrown out only to coast home in triumph as London's Mayor.

A defiant Mr Galloway, whose Glasgow Kelvin seat is destined to disappear in boundary changes at the next election, said he was confident local party members would pick him to stand in Glasgow Central instead. But he warned: "If we are cheated of that right, then, of course, I will defend that seat as an independent."

Mr Galloway, long an outspoken defender of the Saddam regime and bitter opponent to the war in Iraq, yesterday denounced the charge that he was in the pay of Saddam as a smear based on a forgery.

His solicitors, Davenport Lyons, said he would take "whatever legal action" was necessary. And in a statement they added: "Mr Galloway has never, directly or indirectly, been granted, nor has he sought, oil or any other commercial contracts with Iraq, nor has he received any money from

Saddam Hussein's regime." The Telegraph, however, stuck by its story and produced new evidence in the shape of a letter said to be from Saddam's most senior aide.

The document, found like the other material among files in the bombed and looted foreign ministry in Baghdad, is dated 2 May, 2000 and marked "Confidential and Personal".

Referring to Mr Galloway's demand for more money for his support for the regime, it says: "The belief is that ....

even using Western methods [he] needs exceptional support which we cannot afford and I do not think we can promise to do that."

The letter is said to have been circulated to the regime's topmost ranks including deputy prime minister

Tariq Aziz, the country's vice president Taha Yassin Ramadan - and Mohammed Saeed al-Sahhaf, then foreign minister who later achieved fame as "comical Ali" the regime's media mouthpiece during the war.

The earlier documents alleged that the MP held a meeting with an Iraqi agent on Boxing Day 1999 when payment was discussed. The MP last night said that he might have been in Iraq at the time. He added: "I well remember spending an Xmas in Baghdad. But I never had any meeting with an Iraqi intelligence man and I never solicited any money from anybody in Iraq that Boxing Day or any other day."

Mr Galloway was already facing a separate Labour Party inquiry, and disciplinary action, over his strongly voiced hostility to the war - including his description of America and Britain as "wolves" invading Iraq.

Those remarks were attacked by Mr Blair himself as "disgraceful" and the party was gearing up for action at the next meeting of Labour's ruling national executive committee in June.

Many expected that Mr Galloway would have the party whip withdrawn, expelling him from the ranks of Labour MPs and leading to his automatic deselection.

That process, however, now threatens to be derailed by legal action, and by fears that Mr Galloway might "do a Livingstone". The MP's allies on the far Left were already claiming a witch-hunt against him. And Mr Galloway was also defended by the chairman of his constituency party.

Labour Left-wingers and some others voiced doubts over the way the documents had been discovered in a smoke-blackened box file lined with tiger-pattern wallpaper and marked, in Arabic, with the word Britain.

Intelligence sources conspicuously failed to confirm any suspicions over Mr Galloway's financial dealings with the regime. And the Foreign Office, unusually, suggested publicly that the newspaper might care to hand over the material it had unearthed to be verified by the Government'sown intelligence experts. The Daily Telegraph's editor, Charles Moore, said: "We stand fully behind our story." And he defended David Blair, the reporter who discovered the documents as "an honourable and courageous journalist".

The original memorandum from an unnamed intelligence chief suggested Mr Galloway was already receiving up to 15 cents a barrel from the three million barrels of Iraqi oil exported every six months, but suggested that he, or his Iraqi representative, businessman Fawaz Zureikat, wanted more. Mr Zureikat, like Mr Galloway, has denied all charges.