AN arms deal worth £2.6 billion with Russia that could have left Iraq less dependent on US military hardware and boosted the capability of Iraq's armed forces has been cancelled amid allegations of corruption.
Russian sources have blamed the US for the collapse of the deal, which would have made Russia the second-biggest military supplier to Iraq after the United States.
Igor Korotchenko, head of the Moscow-based Centre for Analysis of World Arms Trade, said: "I believe Washington regarded this as an absolutely unacceptable scenario."
However, a spokesman for Prime Minister Nuri al Maliki yesterday denied US pressure played any role and said Iraq now planned to renegotiate the agreements.
"Our need for weapons still stands so we will renegotiate new contracts," said Ali al Moussawi, the prime minister's media advisor. "This is a precautionary measure because of suspected corruption."
Al Moussawi said the deal was cancelled after Maliki came back from a visit to Moscow in October.
"When Maliki returned from his trip to Russia, he had some suspicions of corruption, so he decided to review the whole deal ... There is an investigation going on, on this."
Al Moussawi declined to say who specifically was being investigated.
The cancellation of the initial deal announced last month is a setback for Moscow's attempts to firm up its slipping foothold in the Middle East and for efforts by Iraq to equip its armed forces.
The US has sold Baghdad billions of dollars' worth of arms including F-16 fighters and tanks since the 2003 invasion.
There appeared to be confusion in Iraq over the deal: in a bizarre sequence of events the acting defence minister Saadun al Dulaimi, who negotiated the deal, directly contradicted the prime minister's office, insisting nothing was cancelled.
In a hastily organised press conference, al Dulaimi said no contracts had been signed, adding: "We did not transfer one dinar, we did not agree in a finalised way. It was only an offer, like any other offer."
But his position was swiftly denied by the premier's spokesman.
Asked about the minister's remarks, al Moussawi said: "The deal was completely cancelled. Now we have started new negotiations [with Moscow] because we want weapons," he said.
"These negotiations will be for different kinds of weapons, more advanced weapons, and will use a different way of contracting."
The Russian embassy in Baghdad was not available for comment but another source in Moscow pinned the blame on Washington.
"Iraq's declaration was forced by the United States, which is trying to avert this agreement's implementation," an unnamed senior official from the Russian military industry told the Russian state news agency RIA Novosti.
Russian media said the arms deliveries covered 30 Mi-28 attack helicopters and 42 Pantsir-S1 surface-to-air missile systems.
Discussions were also said to be under way for Iraq's eventual acquisition of a large batch of MiG-29 fighters and helicopters, along with heavy weaponry.
The statement announcing the deals said they were secretly discussed as early as April and revisited again in July and August during visits to Russia by Iraqi delegations that included Dulaimi.
The war in Syria threatens to unseat Moscow's sole unwavering Arab ally, Bashar al Assad, and has made it crucial for Russia to forge other regional alliances.
Russia also lost £2.5bn in contracts because of the Nato-led Libya offensive that toppled Muammar Gaddafi, a friend of the Kremlin, and Moscow has been trying to find a way to compensate.
Iraq, meanwhile, has sought to re-equip an army that, while regarded as a capable counter-insurgency force, lacks the ability to defend the country's borders, airspace or maritime territory.
The deal with Russia was seen by diplomats in Baghdad as a way for Iraq to avoid becoming too dependent on American military equipment, and to hold more bargaining power in weapons negotiations with Washington.
Korotchenko said the cancellation was "unprecedented in the history of the Russian arms trade".
"As soon as the deal was announced a month ago I said that the US would not allow Iraq to buy such huge quantities of weapons from Russia," he said. He called the corruption allegation a smokescreen, and added: "I believe this is just a pretext and the true reason is Washington applying pressure on Baghdad."