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SYDNEY, Australia -- Australia and the United States, military allies in the invasion of Iraq but fierce rivals in the wheat export trade, are sharpening their scythes for a battle over the big Iraqi grain market.

Russia, the Ukraine, the European Union, India, Canada and Argentina are also eyeing Iraq despite the chaos, difficulty and danger that dogs a market of some 3 million tonnes of wheat, worth some $500 million a year.

"Iraq will be a very commercial, competitive market," said Peter McBride, a spokesman for Australia's monopoly wheat exporter AWB Ltd.

Australia staked an early claim to retain its largest share of the market despite what Baghdad sees as a tarnished record over alleged kickbacks during the Saddam years. AWB has strongly denied the allegations.

AWB bosses flew to Iraq within days of last week's parliamentary approval of the new government in Baghdad, holding weekend meetings with Prime Minister Ibrahim al-Jaafari and others.

After grabbing a dominant share of the Iraqi wheat market when former ruler Saddam Hussein refused to buy U.S. wheat after the Gulf War of the early 1990s, AWB is more confident in Iraq than most.

"We continued to buy Australian wheat after the war because of its high quality. Bids are open to all," Ahmad al-Mukhtar, Trade Ministry director of external relations in Iraq, told Reuters by telephone from Baghdad.

The new government would buy on quality and price, he said.

Iraq's Finance Minister Ali Allawi said reforming the procurement system for food and other supplies was a priority.

"There has been obvious corruption in procurement and there were illegal and illegitimate transfers of huge funds abroad, outside the control of the Iraqi state," Allawi told Reuters.

"We want to make sure that the contracts that are pending or are signed recently do not reek of corruption," he said.

AWB believes it will take 1.5-2.0 million tonnes of the Iraqi wheat import market, which is seen rising to between 3 million and 4 million tonnes from last year's reduced imports of 2 million tonnes.

But chaotic Baghdad has potential rivals confused.

"They tender but they don't buy," complained a Chicago trader, who said tenders were announced late, or not at all.

After decades of neglect to the farm sector, Iraq's new leaders dream of modernising farming techniques to produce enough crops and reduce dependence on imports.

But only 500,000 tonnes of wheat was coaxed from the ravaged land last year and no one expects a quick recovery in output.

A recent visit to the United States by top brass from Iraq's wheat-buying body, the Iraqi Grain Board, led by director general Khalil Assi, encouraged U.S. suppliers by dropping a requirement that they deliver grain to upcountry Iraq by truck.

Assi also said Iraq intended to buy more than half its wheat imports of 3-4 million tonnes a year from the United States.

But eight months earlier in Australia, Assi made similarly positive statements about buying intentions for Australian wheat.

Australia had been selling up to 2 million tonnes a year to Iraq since the early 1990s. Iraq has bought only 484,500 tonnes of U.S. wheat so far in the current marketing year starting June 1, 2004, which is much lower than the 1.5 million tonnes Iraq bought from Australia in 2004.

Skepticism is high in Europe.

The Iraqi Grain Board lacked facilities and often ignored e-mails or asked for counter-offers weeks after original bids, one European trader said.

"This is not serious commercial practice," the trader said. Bidders still wait for a decision on Iraq's latest tender for up to 150,000 tonnes of wheat, posted April 6.

"I have given up trying to find out what they are doing," a leading European exporter said.

Even so, European traders say Russia, Ukraine and the EU have good potential for near-term sales to Iraq from ample supplies.

Iraq bought 236,000 tonnes of German wheat last year. Russia was the biggest supplier to Iraq in past years and grain from that country is cheaper than Australian and U.S. supplies.

Exporters of good quality Russian wheat would be happy to sell to Iraq, said Andrei Sizov of leading Russian agricultural analysts SovEcon. But they feel shut out and Sizov sees little chance of exports in the near term.

The United Nations' Food and Agriculture Organisation sees no quick fix in Iraq's grain-buying procedures.

"It's taken longer than we thought. I don't see any light at the end of the tunnel for at least another few months," FAO commodity specialist Abdolreza Abbasian said.

The Rome-based body also sees political complications holding Europe back from challenging Australia and the United States. Iraq might be trying to buy from India and the Black Sea, and Canada was another possible source of supply, Abbasian said.

Canada, not part of the attack on Saddam Hussein, would sell to Iraq despite limited previous sales, if the returns were good, said Louise Waldman, spokesman for the Canadian Wheat Board. .

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