Iraq Releases Briton Held in Bribe Case : Mideast: London frees $125 million of Baghdad’s funds frozen since Kuwait attack. The businessman, jailed for nearly six years, maintained his innocence.

Iraqi authorities Saturday freed a British businessman held for nearly six years on bribery charges, ending a freeze on some of Baghdad’s badly needed funds impounded in London since Iraq’s invasion of Kuwait in August, 1990.

Prince Sadruddin Aga Khan, the top U.N. envoy to Saddam Hussein’s regime, broke the news at a press conference in Baghdad, announcing that Ian Richter, 45, a chemical engineer, had been turned over to his care. Richter is expected to leave Iraq today.

Aga Khan said the release would lead Britain to unfreeze $125 million in Iraqi assets.

Confirming the deal in London, a Foreign Office spokeswoman said Richter’s release was anticipated. “This is extremely welcome news,” she said. “It’s something we have been pressing for for a long time.”

She denied, however, that the release of the Iraqi assets was precisely related to freedom for Richter, who had been held at Al Ghraib prison outside Baghdad. He had consistently denied that he paid bribes for Iraqi government business contracts.

According to the Foreign Office representative, speaking anonymously, London lifted the freeze on Iraqi assets for unspecified humanitarian purposes. “It has always been our policy that once Ian Richter is released, we would release frozen Iraqi assets in this country for humanitarian reasons,” she said. “We are concerned about the humanitarian situation in Iraq, and this money will be used for humanitarian purposes.”

The two-part deal illustrates the agonizing struggle between Hussein and the Western and Middle East powers that drove his army out of Kuwait nine months ago. The U.S.-led wartime allies are pursuing a difficult strategy designed to ease Hussein out of power without disintegrating the Iraqi state.

Key to the policy is denying the Iraqi leader unrestricted access to revenues raised by the potential sale of oil. The problem is that without money, Hussein’s regime is unable to feed the 17 million Iraqis--and with full control of it, the strongman could reward his loyalists and punish his enemies.

The Foreign Office spokeswoman indicated that British authorities would attempt to control the use of the funds and limit it to humanitarian needs.

The Richter case has been near the top of the British-Iraqi file for years. Prime Minister John Major has repeatedly called for his release, and former Prime Minister Edward Heath, who won freedom for another British prisoner earlier this year, has also been active on Richter’s behalf. “I think we have managed to persuade the authorities that it is in their interest that he should be released,” Heath said Saturday as Aga Khan’s press conference statement reached Britain.

Richter’s wife, Shirley, had visited her husband several times over the years since his arrest, most recently in July. A year earlier, she had told a reporter: “Ian . . . always felt that this was a terrible mistake and that he would be released, so it was a terrible shock to him to realize that in fact he was facing a life sentence.”

Reached in Baghdad by telephone Saturday by a British reporter, the engineer said he had heard nothing of his release until a jailer told him to pack his bags.

The initial announcement from Aga Khan coincided with his mission to Iraq to try to persuade Hussein to accept a U.N. Security Council resolution that would allow Baghdad to sell $1.6 billion in oil, but only on condition that some of the revenues would be used to purchase food for distribution under U.N. supervision. Iraq has rejected any U.N. role as an infringement of its sovereignty and said that it wants to barter oil for goods to avoid having the United Nations check off a share of its petroleum revenues for war reparations and U.N. relief costs.

Meanwhile, according to the U.N. Food and Agriculture Organization and Baghdad-based humanitarian agencies, most Iraqis are enduring serious food shortages. Wheat purchases have been made in Australia, France and Turkey, according to a recent FAO report, but Baghdad is not expected to be a major buyer through the end of 1992. Before the war, Iraq imported nearly 80% of its food.

With winter cold approaching, Hussein has put the United States and its allies in a difficult position on the issue of food and the economic blockade, exploiting at every opportunity what it calls a callous Western campaign to destroy the Iraqi economy.

But the Iraqi leader himself is troubled by incessant signs that his iron-fisted regime is losing authority. Analysts of the Iraqi situation note that Hussein risks civil unrest--crime is already a growing problem--if food remains beyond the reach of the people. The FAO report said the government is currently able to supply only a third of the people’s food requirements at subsidized prices. There are supplies on the black market, but at prices far too high for the average Iraqi.