Maurice Strong, the United Nations' Korea envoy and an adviser to secretary-general Kofi Annan, on Wednesday said he would step aside until questions were answered over his relationship with a South Korean allegedly hired by Baghdad to lobby UN officials over Iraq's oil-for-food programme.

Last week, US federal prosecutors said Iraq had used Tongsun Park, the South Korean, to influence negotiations over the design of the oil-for-food programme in the early and mid-1990s.

Prosecutors were told that Mr Park had said he used a $5m guarantee from the Iraqi government to “fund business dealings” with a high-ranking UN official, whom he met in a Manhattan restaurant around 1996.

Mr Park also allegedly later said that he had invested “approximately $1m” of Iraqi money “in a Canadian company” established by the UN official's son, although the company failed soon after.

On Monday afternoon Mr Strong, an influential Canadian businessman, said Mr Park had in 1997 invested “on a normal commercial basis in an energy company with which I was associated”.

He also “continued to maintain a relationship with Mr Park”. He added: “Indeed, as a native of North Korea, he has advised me on North Korean issues in my role as UN envoy.” UN officials privately said Mark Malloch Brown, the UN's chief of staff, had spoken to Mr Strong in the morning before his statement was issued.

On Tuesday the UN said it was looking into whether the relationship between Mr Park and Mr Strong was appropriate, but said the UN had not known about it beforehand. It also revealed that Mr Strong was talking to the UN-appointed investigative committee, headed by Paul Volcker, which is looking into the oil-for-food scandal.

Mr Strong, who has a long history of working with the UN and is credited as an architect of the 1992 Earth Summit, insisted: “I have had no involvement or connection whatsoever with the UN's Iraqi oil-for-food program or any other of its Iraqi activities”. He could not recall “a single instance in which I had any contact or discussion on the programme with any of the officials responsible”.

On Wednesday the UN said Mr Strong would “defer any further action on his Korea assignment until his relationship with Tongsun Park is resolved”.

Mr Strong was made Korea envoy in January 2003. In 1997, he was an adviser on UN reform with an office on the 38th floor, close to the secretary-general.

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