Tories caught up in Russian oligarch row

The saga of Lord Mandelson, shadow chancellor George Osborne, Russian tycoon Oleg Deripaska and his luxury yacht, took a new twist today with claims - strongly denied - that the summer encounter in Corfu could have involved a suggested donation to the Tories from the billionaire.

The spectacle of senior politicians rubbing shoulders with the super-rich has once again come to haunt both major political parties after the corrosive and ultimately abortive cash-for-honours investigation which dogged Tony Blair's last period in power.

Last August, then EU Trade Commissioner Peter Mandelson spent some time aboard aluminium baron Mr Deripaska's 238ft boat the Queen K, staying overnight apparently because his friend Nathaniel Rothschild, son of the banker Lord Rothschild, had no space to spare at his luxury villa on the island.

This disclosure, which appeared after Lord Mandelson was brought back into the Cabinet in a shock move by Gordon Brown, was accompanied by questions over whether it was wise of him to appear so close to a businessman often dubbed Russia's richest, at a time when his Brussels post involved him in complex trade negotiations.