MOSCOW, Nov 17 (Reuters) The detention of Russia's Paris club debt negotiator, Sergei Storchak, by police this week is part of a probe into the theft of state funds in debt deals, including with Iraq, a source close to the probe said today.
''There is a big group of people under investigation and there will be new detentions. It is all related to our state debt and the schemes of its redemption, when up to 30 per cent of funds were disappearing,'' the source told Reuters.
''Storchak was detained because he was signing all (the debt-related documents). A number of banks are involved ... and people in the government administration,'' he added.
The Finance Ministry said yesterday that deputy minister Storchak, a close associate of finance minister Alexei Kudrin, might have been detained in a criminal investigation against a third party, not finance ministry officials.
Storchak also oversees a 148 billion dollar oil stabilisation fund, which collects revenues from Russia's booming oil exports.
But Interfax, Itar-Tass and Ria Novosti news agencies quoted the investigation committee at the Prosecutor-General's Office on Saturday as saying Storchak could face direct charges.
''Storchak as well as the general director of the firm Sodexim Zakharov and the president of one of Moscow's banks, Volkov, have been detained on suspicion of an attempt of large budget funds embezzlement by an organised group,'' the agencies quoted committee official Vladimir Markin as saying.
Markin did not respond to phone calls by Reuters.
The source close to the probe told Reuters one of the banks under investigation was Interregional Investment Bank or MIB, chaired by Vadim Volkov. MIB and Sodexim were not available for comments.
Sodexim, which organised a Russian medical equipment exhibition in Baghdad five years ago, is listed on MIB's web site as one of its top clients.
The source said the investigation was most likely partly linked to Russian-Iraqi debt deals.
Moscow has forgiven Iraq much of the debt it owes, but Baghdad still owes Moscow around 10 billion dollar.
Interfax quoted today a unnamed source as saying investigators have already searched apartments and residences outside Moscow of all the three detained men.
''The investigation has yet to establish the exact sum, which was to be embezzled by the group, but we are preliminarily talking about dozens of millions of dollars,'' the source said.
A source close to Kudrin told Reuters yesterday he ''could not rule out'' that Storchak's detention was part of a campaign against the deputy minister's powerful boss ahead of next month's parliamentary election.
President Vladimir Putin promoted Kudrin, a long-term ally, to the rank of Deputy Prime Minister in a reshuffle in September.
Kudrin, Russia's top economic policy maker, told the Russian news agencies through his spokesman that he would try to find out why Storchak was detained, a measure he described as ''very harsh''.
Kudrin is attending a meeting of finance ministers of the 20 most industrialised emerging economies in South Africa.
REUTERS PY BST2236