* Chalabi defends panel's work to purge Baathists
* Denies Sunni election candidates targeted for exclusion
BEIRUT, Jan 28 (Reuters) - An Iraqi panel that vetoed more than 500 election candidates was only doing its job of purging former Baathists from politics, not targeting Sunni Muslims or any other group, its chairman Ahmed Chalabi said on Thursday.
The commission's move this month upset some Sunnis, whose minority community dominated Iraq under Saddam Hussein's rule, raising tensions before the March 7 parliamentary poll.
In fact, more Shi'ite Muslims than Sunnis appeared on a list of 511 barred candidates and around 50 names were later removed because they were found to have been wrongly included.
"I didn't make the law, the commission didn't make the law. We are implementing the law," Chalabi told Reuters in Beirut, denying any political interference in winnowing the candidates.
He said the Supreme National Commission for Accountability and Justice had a legal mandate to bar certain categories of ex-Baathists, members of Saddam's security agencies and others.
But questions about the commission's legality and its opaque workings have generated fears that the election may deepen Iraq's sectarian divide, even as violence begins to fade.
Chalabi, 65, said there was no political storm in Iraq over the panel's work, accusing the Western media of exaggerating. He said Iraqis did not view the anti-Baathist law as sectarian.
"People talk about the rule of law. Why should it be discarded just because of the conception of some foreign parties that the law is not fair?" the secular Shi'ite politician asked.
U.S. Vice President Joe Biden said in Baghdad last week his country had no problem holding Baath party loyalists accountable and denied he was trying to mediate in the dispute.
Human Rights Watch criticised Iraq's candidate-vetting system this week and called for those excluded to be reinstated.
"This commission has undermined faith in the electoral process at a time when there is already tremendous sectarian tension and a serious risk of a renewed Sunni election boycott," said Sarah Leah Whitson, the group's Middle East director.
"Excluding candidates in a secretive process based on unclear criteria ensures that the election will be neither free nor fair," she added in a statement by the U.S.-based watchdog.
The election is a major test for Iraq's stability as the Sunni-Shi'ite bloodletting that followed the 2003 U.S. invasion recedes and U.S. troops prepare to withdraw by the end of 2011.
Chalabi, an American favourite before the invasion, later fell from favour in Washington. Adept at political manoeuvering, he has nurtured ties with Iran and is now an election candidate on a slate led by Iraq's largest Shi'ite religious party.
He said Iraq had decided former Baathists should be barred from public life in the same way as Nazis in post-war Germany. If the law was considered too harsh, it should be changed.
Prime Minister Nuri al-Maliki, seeking to claim credit for improved security to boost his election campaign, has blamed Baath loyalists for several bombings in Baghdad since August.
Suspected Sunni Islamist suicide bombers killed more than 30 people on Monday in coordinated attacks on three Baghdad hotels.
Chalabi said stability in Iraq had improved in the sense that there were no more no-go areas for the government, but argued that subversives had penetrated the security forces.
"The people who are blowing things up have infiltrated the security system," he said. "They are inimical to the government and they facilitate the work of the terrorists."
Chalabi listed government corruption, Baathist groups and Islamist militants as the greatest threats facing Iraq and denied that the candidate-vetting process was destabilising.
"Those who want to cause trouble will do so whether there is a commission or not. They want to bring down the system."
Editing by Noah Barkin
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