Former Prime Minister Helen Clark has angrily denied a claim in a United States diplomatic cable that the previous Labour-led Government sent New Zealand non-combat engineers to Iraq so that dairy company Fonterra could secure a United Nations contract.

She described the claim as preposterous.

In one of the cables released by Wikileaks a senior staff member at the Defence Ministry reportedly told the US Embassy that Miss Clark had decided to send soldiers to Iraq to stop Fonterra losing lucrative United Nations Oil for Food contracts.

The embassy did not name the defence staffer who provided the information on the Cabinet meeting in which the Labour Government discussed sending personnel to Iraq.

"Senior MOD officials (strictly protect) tell us it was not until Finance Minister Michael Cullen pointed out in a subsequent Cabinet meeting that New Zealand's absence from Iraq might cost NZ dairy conglomerate Fonterra the lucrative dairy supply contract it enjoyed under the United Nations Oil for Food program," the cable said.

It said the prime minister "found a face-saving compromise" by sending non-combat engineers to be embedded with British forces.

Two rotations of 61 engineers spent a year in Basra from September 2003, performing engineering and humanitarian tasks.

Miss Clark, now head of the United Nations Development Programme, told Radio New Zealand the allegation was wrong.

"I am absolutely incensed at the suggestion that some Defence Ministry personnel seem to have made to various diplomats that there was any connection between my support for sending engineers to do humanitarian work in Iraq with the interests of Fonterra, I mean this is simply preposterous."

Cabinet responded to a call from the UN for states to help in Iraq and she has no recollection of Dr Cullen making such a comment.

"Absolutely nothing. I read this stuff on the website last night with incredulity. I can't even remember any suggestion of Michael Cullen even raising it. What I know is that after the UN Security Council resolution that said `would you come and help member states in Iraq' we looked at what we could do."

Mr Goff yesterday said the allegation was ridiculous.

"No such trade-off was ever suggested and if it ever had been, it would have been rejected out-of-hand. We do not trade putting the lives of our military personnel at risk for commercial deals. It is a completely false claim."

Miss Clark said the cables were not to be read as fact.

"So much of it is just plain gossip. And I just have to say to that one that I am shocked and appalled to have my name dragged into that rubbish."

Mr Goff said the engineers were sent when the UN Security Council provided a mandate for countries that were not part of the invasion to assist.

Mr Goff said Labour opposed the invasion of Iraq.

"The decision to later send engineers was made after an invitation from the UN Security Council. The US embassy official who wrote this cable was clearly completely out of touch...

"The idea that we would send army engineers to Basra after Michael Cullen purportedly stated at the Cabinet that our stand on Iraq would cost Fonterra is totally false. No such statement was ever made nor was there ever a discussion to that effect."