UPDATE 1-Total CEO says boss aware of Iran lobbying-report

(adds background, more details, OECD bribery definition)

By Marie Maitre and Thierry Leveque

PARIS, March 27 (Reuters) - The head of French oil firm Total told bribery investigators his boss Thierry Desmarest, who now chairs the company, knew about the use of lobbyists to clinch a major deal in Iran, a newspaper reported on Tuesday.

Chief Executive Christophe de Margerie, who has been targeted in a corruption probe into the 1997 South Pars gas deal, said he had told Desmarest Total needed "help" to win the multi-billion dollar deal, France's L'Est Republicain reported.

The newspaper cited leaked extracts from what it described as a transcript of de Margerie's testimony to an investigating judge during a 36-hour detention for questioning last week.

Total declined to comment on the report.

"I can't comment on this. We don't know if this is true. These documents should not have been made public. They are confidential," a Total spokesman said.

Desmarest was both chairman and chief executive until last month when the roles were split. In 1997, De Margerie was in charge of Middle East operations, reporting to Desmarest, who remains his boss as non-executive chairman.

Total has denied any wrongdoing on the Iran gas deal and in Iraq where French investigators are examining separate claims that it infringed the United Nations oil-for-food programme. De Margerie is under formal investigation in both cases.

Analysts have said the Iran investigation -- coupled with the similar probe on alleged sanctions-busting in Iraq -- has so far failed to trouble investors, who believe Desmarest could return to his old CEO job if de Margerie were charged or prevented from carrying out his duties effectively.

Tuesday's alleged leak of testimony marks the first time Desmarest's name has been drawn into the increasing public fallout from the deal, which was signed at a time of tensions with the United States over foreign oil investments in Iran.

"When I decided in 1995/1996 to use a lobby contract, I informed my line superior, Mr. Thierry Desmarest," De Margerie told investigators, according to the newspaper extracts.

"I told him that in the context of the $4 billion contract, if we wanted to stand a chance to progress, in a difficult political environment in Iran and the United States, we needed to be helped."

LOBBYING CONTRACT

Desmarest flew to Tehran to sign the $2 billion deal for the first phase of South Pars on September 28, 1997, snatching the biggest oil deal with Iran since the Islamic Revolution in defiance of U.S. efforts to punish oil firms investing there.

The deal upset many in Congress who saw it as a chance to apply the 1996 Iran Libya Sanctions Act, which allowed sanctions against foreign firms investing in the energy sectors of nations accused by Washington at the time of funding terrorism.

U.S. President Bill Clinton later waived sanctions against Total after the European Union threatened trade action over its objections to the extension of U.S. law abroad. In Iran, the South Pars deal also coincided with an official crackdown on corruption and influence-peddling after a series of embezzlement trials involving state agencies and banks.

According to l'Est Republicain, de Margerie described in his testimony to a French investigating magistrate how Total had appointed a "facilitators' lobby" but had no trace of the deal.

He was reported to have said a lobbying contract was signed in July 1997 with Virgin Islands-registered Baston Associated Ltd, but that Total had not kept a copy and that he did not remember if he, or someone acting on his orders, had signed it.

While lobbying is a commonly accepted practice, especially where politics and business mix, the Organisation for Economic Co-opoeration and Development defines bribery as a specific inducement to do something improper or neglect official duties.

The French investigation into the deal started in December 2006 on the discovery of 95 million Swiss francs in the Swiss bank of an intermediary, according to judicial sources.

De Margiere, who is being investigated on suspicion of bribing foreign officials and misuse of company funds, declined to name one Iranian intermediary on the grounds this was "particularly sensitive," according to the reported testimony.

The only Iranians officially named in the investigation so far are ex-president Akbar Hashemi Rafsanjani and his son Mehdi, a businessman.The Paris prosecutors' office said last week de Margerie was forbidden from contacting either man.

Mehdi told Reuters he had no knowledge of the case.

Rafsanjani handed over Iran's presidency on August 3, 1997, to Mohammad Khatami following defeat in May elections that year. (Additional reporting by Tim Hepher)