THE fate of two German hostages in Iraq remained unclear yesterday as the Berlin Government came under fire for apparently paying a $5 million (£2.8 million) ransom to secure the release of another German hostage late last year.

Rene Bräunlich, 31, and Thomas Nitzchke, 28, were kidnapped early Tuesday morning near the Baijo oil refinery, 250 kilometres (155 miles) north of Baghdad. The men, who were installing machinery at the refinery, had been in Iraq for two days and were intending to return home within a week.

They were seized by a gang of men wearing Iraqi national army uniforms and bundled into the boots of two Japanese-made cars. Their Iraqi intepreter was not taken.

Frank Walther Steinmeier, the German Foreign Minister, said yesterday that the Government was doing everything it could to secure their release. The kidnappers had yet to make contact, he said. US forces had sealed off nearby streets and were using helicopters to track suspicious cars to try to locate the engineers.

Herr Steinmeier acknowledged that attempts to secure the men’s release have been complicated by the continued speculation over the payment of a ransom to secure the release of Susanne Osthoff, a German arcaheologist.

Frau Osthoff, who had converted to Islam and lived in Iraq, was released unharmed shortly before Christmas after being held for three weeks, apparently by a group associated with Abu Musab al-Zarqawi, the al-Qaeda leader in Iraq.

The German Government has acknowledged it played a role in securing her freedom but has declined to give details.

Speculation that a $5 million ransom had been paid to her captors intensified after reports that German agents had found $3,000 tucked into her clothing after she was set free. The notes apparently had the same serial numbers as the ransom. Yesterday the Government was accused of putting at risk the lives of 100 Germans still working in Iraq by encouraging insurgents to target German nationals, a charge denied by Herr Steinmeier. “The problem is not ransom payments, but the reporting about them,” he said.

Although there has been no official confirmation, Germany is known to have paid a ransom to secure the release of German citizens on a number of occasions in recent years.

The British activist Norman Kember has been missing in Iraq since November 26. Britain says it refuses to pay a ransom and is seeking another way to secure his release.

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