Serbian Interior Minister Dusan Mihajlovic told Belgrade radio B92 that a "very serious and thorough probe has been launched" into reports that the state-controlled company Jugoimport acted as an intermediary in a weapons deal between a Bosnian Serb military company and the regime in Baghdad.

Mihajlovic, who is also chairman of Jugoimport's managing board, said he had no information on "any exports of weapons to Iraq."

"But due to the seriousness of the affair, I have also ordered a probe into activities of all companies dealing with military equipment and weapons," he said.

Local media in Serbia and Bosnia reported that the Jugoimport company had acted as an agent for Orao, a Bosnian Serb military company, to arrange the sale of its weapons parts to Iraq.

In Sarajevo, US official Donald Hays said a NATO investigation has revealed that weapon parts sold by Orao company ended up in Iraq via a third party, but refused to comment reports that Yugoslavia was involved in a trade.

In Belgrade, top Yugoslav officials including Mihajlovic were in "consultative" meeting late Tuesday, B92 reported.

"State officials are treating this affair extremely seriously, since this kind of deal cannot not possibly be done through any legal channels," Mihajlovic said.

He insisted that Belgrade "firmly respects its international obligations" and reaffirmed the Balkans state's commitment to the global war on terrorism.

"We want to clear up this affair, hoping it will have no impact on further development of our relations with the United States and the United Nations," Mihajlovic said.

Ties between Belgrade and Baghdad were strengthened during the regime of former Yugoslav president Slobodan Milosevic, partly as a result of sanctions imposed by the West that crippled both countries.

Iraq, whose military targets have been repeatedly bombed by US and British jets since the 1991 Gulf War, backed Belgrade diplomatically against NATO during the alliance's 1999 air war on Yugoslavia.

Since Milosevic's ouster in 2000, Belgrade reformist authorities have distanced themselves from Baghdad, but the allies of the former strongman have still kept links with Saddam Hussein and his regime.

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