Galloway denies he was on Saddam's payroll after 'discovery' of secret memo

George Galloway, the controversial Labour MP, has denied that he was on the payroll of Saddam Hussein, taking hundreds of thousands of pounds from oil-for-food income intended to feed starving Iraqi children.

A document purporting to be a confidential memorandum to Saddam by his head of intelligence and obtained by The Daily Telegraph from the floor of a looted ministry is reported to show that the MP for Glasgow Kelvin took up to £375,000 a year from the Iraqi regime's oil-for-food programme.

In a statement the MP – who faces deselection and expulsion from the Labour Party over his outspoken opposition to the war – said: "I have never solicited nor received money from Iraq for our campaign against war and sanctions. I have never seen a barrel of oil, never owned one, never bought one, never sold one."

He said later that he intended to sue the Daily Telegraph for libel.

The memorandum, which the Telegraph said was found by one of its reporters in the looted Foreign Ministry in Baghdad, allegedly shows that Mr Galloway had a secret relationship with Iraqi intelligence as he waged a fierce campaign against the war on Iraq and the previous UN sanctions regime.

The document, allegedly sent to Saddam Hussein's office on 3 January 2000, outlines talks between Mr Galloway and an Iraqi spy. In a meeting with the spy on Boxing Day 1999, Mr Galloway allegedly outlined the plans of his Mariam Appeal against sanctions, named after an Iraqi child he flew to Britain for leukaemia treatment.

The spy chief wrote that Mr Galloway had told him that he "needs continuous financial support from Iraq. He obtained through Mr Tariq Aziz [Deputy Prime Minister] three million barrels of oil every six months, according to the oil-for-food programme. His share would be only between 10 and 15 cents per barrel ... He [Galloway] also obtained a limited number of food contracts with the Ministry of Trade. The percentage of its profits does not go above one per cent."

The security chief, whose signature on the memo is illegible, said Mr Galloway was pressing for more money and recommended that his demands be met. "He suggested to us the following: first, increase his share of oil; second, grant him exceptional commercial and contractual facilities," the memo says.

A letter from Mr Galloway himself, allegedly also found in the Foreign Ministry, is reported to show that Mr Galloway's intermediary in Iraq was Fawaz Zureikat, a Jordanian businessman. The letter, on House of Commons notepaper, says: "This is to certify that Mr Fawaz A Zureikat is my representative in Baghdad on all matters concerning my work with the Mariam Appeal or the Emergency Committee in Iraq."

The intelligence chief's memo quotes Mr Zureikat as saying: "His [Galloway's] projects and future plans for the benefit of the country need financial support to become a motive for him to do more work and, because of the sensitivity of getting money directly from Iraq, it is necessary to grant him oil contracts and special and exceptional commercial opportunities to provide him with an income."

Mr Galloway's statement last night said he had never met Iraqi intelligence officials "to the best of my knowledge".

"Given that I have had access over the years to Iraq's political leadership, most often the Deputy Prime Minister, Tariq Aziz, I would have absolutely no reason to be meeting with an official of Iraqi intelligence.

"From the way they have been described to me, I can state that [the documents] bear all the hallmarks of having been either forged or doctored and are designed to discredit those who stood against the war."

Mr Galloway was on BBC Radio 4's Today programme asked about his relationship with Mr Zureikat.

The MP said: "Mr Zureikat is a long–time associate of mine. He is a businessman operating throughout the Middle East and the wider world, and he has been for some considerable time the chairman of the Mariam Appeal ... a worldwide campaign to lift the embargo and against war on Iraq."

The Daily Telegraph editor Charles Moore said that he stood by the newspaper's story.

Mr Moore said: "The state of documents in any ministry in Iraq is not in apple pie order, but your listeners heard David Blair, our correspondent who found the document, describe the situation, and that seems to be a strong prima facie case that these are genuine documents."