BAGHDAD Iraq said on Saturday it had cancelled a $4.2 billion (2.6 billion pounds) deal to buy military jets, helicopters and missiles from Russia, citing possible corruption in the contract.
In a confusing exchange, the announcement by Prime Minister Nuri al-Maliki's office was immediately contradicted by the acting defence minister who denied the corruption charges and said the Russian arms deals were still valid.
The arms agreements were a sensitive issue for Iraq. U.S. military hardware remains key for Iraq's armed forces, but the Russian deal had appeared to open a way for Maliki to push back against U.S. pressure by diversifying his arms suppliers.
The Russian sale was agreed just as Washington warned Maliki, who is close to Shi'ite Iran, to curb Iranian flights ferrying weapons through Iraqi airspace to aid Syrian President Bashar al-Assad in his fight against a revolt there.
Maliki's media adviser Ali al-Moussawi said the decision to renegotiate the agreements was taken after the prime minister was informed about possible wrongdoing in the contract.
"Our need for weapons still stands so we will renegotiate new contracts," Moussawi said. "This is a precautionary measure because of suspected corruption."
But acting Defence Minister Sadoon al-Dulaimi, who negotiated with the Russians, dismissed the corruption charges and said the deals would go ahead.
"We have not transferred even one dinar, there was no agent, no contract was signed. These were just technical and financial offers," he told reporters in Baghdad.
Russian arms exporter Rosoboronexport declined to comment. Russia's Interfax news agency reported the Russian embassy in Iraq said it had not been informed the deal had been scrapped.
The initial announcement about the deal itself was unusually released in a Russian government document issued to reporters during Maliki's visit to Moscow in October. The document said deals were signed with Iraq's acting defence minister in April, July and August.
Russia's daily Kommersant said the contract envisaged the delivery of surface-to-air missile and anti-aircraft artillery weapon systems, MiG-29M/M2 aircraft as well as armoured vehicles and attack helicopters.
NO. 2 IN IRAQ
The deals would have made Russia the second largest military supplier to Iraq after the United States, which has sold Baghdad billions of dollars in arms including F-16 fighters and tanks since the 2003 invasion that ousted Saddam Hussein.
But the Russian agreements fit into the wider context of Maliki's juggling interests over the war against Syria's Assad. Iran and Russia support Assad, while the rebels fighting him are backed by Saudi Arabia, Turkey and Western powers.
Maliki relies on the United States for military aid, but also depends on Iranian influence at home to keep control over Shi'ite allies in his fragile cross-sectarian government of Shi'ites, Sunnis and Kurds.
"One should not rule out pressure from the United States, which certainly does not want to let the Iraqi government - a buyer of American arms or arms from suppliers that are U.S. allies - out of its zone of control," said Ivan Konovalov, a military expert in Moscow.
News of the cancellation also came at a time when Russia has been entangled in a series of corruption scandals involving its defence ministry and its space ministry.
On Friday, President Vladimir Putin fired the chief of his military staff, days after sacking the defence minister over a corruption and sleaze scandal.
Iraq had been off limits to Russian defence contracts after the U.S.-led invasion that overthrew Saddam Hussein. The Sunni dictator had been one of the biggest customers for Russian arms.
(Additional reporting by Lidia Kelly in Moscow; Writing by Patrick Markey; Editing by Stephen Powell)