The decision was taken on Monday after Paul Volcker, who is leading an independent inquiry into allegations of fraud and corruption into the now-defunct $64-billion programme, released his panel's interim report on Friday.

 

The panel said that Benon Sevan, who led the programme, had obtained oil allocations from Saddam Hussein's government on behalf of a trading company led by a relative of former UN secretary-general Boutros Boutros-Ghali.

 

Another official who helped set up the oil-for-food programme, Joseph Stephanides, violated normal bidding procedures to help award a contract under the scheme to a British firm, the panel said.

 

Claim questioned

 

Neither of them was accused of taking cash although the Volcker inquiry, which is ongoing, questioned Sevan's claim that a series of payments he received had come from an elderly aunt in his native Cyprus.

 

Kofi Annan has said he will waive
diplomatic immunity

UN spokesman Fred Eckhard said the two men would have two weeks to respond to the charges after they received formal notice of their suspensions by Wednesday.

 

"They were suspended with pay, which is the most common procedure," Eckhard said. "It is the beginning of the process."

 

Sevan has retired but has been kept on a token $1 annual salary so that he would be available to the inquiry.

 

Immunity 

 

He still has diplomatic immunity from prosecution, although UN Secretary-General Kofi Annan has said he will waive that immunity in the case of any criminal indictments over the oil-for-food scandal.

 

Eckhard said the suspension meant Sevan should keep away from UN premises unless working on his defence.

 

Sevan's files and computers have been turned over to the investigation.

 

Between 1996 and 2003, the programme allowed Iraq to use revenue from oil sales to buy humanitarian supplies. The intent was to ease the burden of international sanctions on ordinary Iraqis.