Indian official demoted over oil-for-food fraud

India's foreign minister was stripped of his post Monday over allegations that he benefited illegally from the U.N. oil-for-food program in Iraq, becoming the first political casualty of an independent report that revealed massive corruption in the effort to help Iraqis suffering under sanctions.

Prime Minister Manmohan Singh, who summoned Foreign Minister Natwar Singh for an hourlong meeting at his residence, demoted him to minister without portfolio, the prime minister's office said in a statement.

Natwar Singh had rejected calls for his resignation, insisting that he received no favors or bribes from Saddam's government, or benefited from the $64 billion oil-for-food program.

The independent inquiry, headed by former Federal Reserve Chairman Paul Volcker, has accused more than 2,200 companies and prominent politicians worldwide of colluding with Saddam Hussein's regime to bilk the oil-for-food program of $1.8 billion in kickbacks and illicit surcharges.

It named Singh and the ruling Congress party as a "non-contractual beneficiary."

Benon Sevan, the program's executive director is being investigated for allegedly accepting kickbacks and French judges are investigating 10 French officials, including former U.N. ambassador Jean-Bernard Merimee, and business leaders under suspicion. But Singh's demotion was the first government action taken against an acting official since the independent report was released two weeks ago.

After initially treating the report with skepticism, the Indian government ordered a judicial investigation into the allegations to be led by former Indian chief justice R.S. Pathak.

Volcker's report has become a major embarrassment for Manmohan Singh, a 74-year-old former diplomat who has led India's campaign for a permanent seat on the U.N. Security Council.

Monday, the Congress party said it had written to U.N. Secretary General Kofi Annan seeking "all such documents on the basis of which the Volcker committee made the allegations."

The oil-for-food program allowed Iraq to sell limited and then unlimited quantities of oil, as long as most of the money was used to buy humanitarian goods to help ordinary Iraqis cope with U.N. sanctions, the AP reports.

V.Y.