Leading anti-war Labour MP George Galloway was last night fighting to save his political career after claims he was secretly in the pay of Saddam Hussein's regime.

Mr Galloway said he intended to sue over allegations he received at least £375,000 a year from the dictator.

He already faced the threat of being ousted from his seat after branding Tony Blair and President George Bush "wolves" who were attacking Iraq, and for urging British soldiers not to fight.

Now Labour officials are to investigate the "extremely serious" allegations, said party chairman Ian McCartney.

The Daily Telegraph reported that a confidential memorandum sent to Saddam by his head of intelligence - which a reporter unearthed in Iraq - showed Mr Galloway had asked a secret agent for a greater cut of Iraq's exports under the oil-for-food programme.

It was angrily denounced as secret service "black propaganda" by the Glasgow Kelvin MP.

"I have never solicited, nor would I have accepted had I been offered, any financial assistance of any kind from the Iraqi regime," he said.

"This is a pile of black propaganda, intelligence hocus pocus, and The Daily Telegraph have either been a party to it or they have been hoodwinked by it.

"But either way, they will answer for it in front of the British courts."

Labour's general secretary David Triesman, who was already examining Mr Galloway's remarks on the war, will investigate the claims and report to the party's National Executive Committee.

Mr McCartney said: "The allegations are extremely serious. I understand George Galloway has denied these allegations and obviously I cannot comment any further on them."

The Daily Telegraph reported that the memo said the MP entered into partnership with an Iraqi broker selling oil on the international market.

The memo was found by one of its journalists, David Blair, in the looted foreign ministry in Baghdad.

It suggested that while campaigning for his anti-war charity, the Mariam Appeal, Mr Galloway was conducting a relationship with Iraqi intelligence behind the scenes.

Mr Galloway acknowledged he wrote a "To whom it may concern letter" on Commons notepaper certifying that Jordanian businessman Fawaz Zureikat was his representative in Baghdad. The letter was also found in the ministry.

Mr Zureikat had been one of the Mariam Appeal's main financial backers, along with the governments of Saudi Arabia and the United Arab Emirates, he said.

Mr Galloway insisted that the newspaper's claim that he had met Iraqi intelligence officials was incorrect "to the best of my knowledge".

"Given that I have had access over the years to Iraq's political leadership, most often the deputy prime minister Tariq Aziz, I would have absolutely no reason to be meeting with an official of Iraqi intelligence," said Mr Galloway.

He added that any interests he had in relation to the Mariam Appeal were recorded in the House of Commons Register of Members' Interests.

Last night, Charles Moore, editor of The Daily Telegraph, insisted: "We stand fully behind our story.

"David Blair has proved himself, in a number of dangerous situations around the world, to be an honourable and courageous journalist and we have absolute confidence in his integrity.

"We have observed perfectly conventional journalistic behaviour in this matter. We have been contacted by solicitors acting for Mr Galloway."