The world's biggest food company, Nestle, has become caught up in a row with the Ethiopian Government over compensation for a nationalised local subsidiary.

The dispute centres on a livestock firm that was owned by Germany's Schweisfurth Group, a Nestle subsidiary, before being nationalised by Ethiopia's then military government in 1975.

We think it is extraordinary that Nestle is trying to claim $6m from a country suffering such severe deprivation Oxfam

According to poverty relief organisation Oxfam, the Ethiopian Government has offered to pay Nestle about $1.5m (�930,000), a figure based on the current exchange rate between the dollar and the Ethiopian birr.

But the food giant is pushing for a payment of $6m, a sum based on the exchange rate in force at the time of the nationalisation, Oxfam said.

BBC News Online was unable independently to confirm the two figures but a Nestle spokesman said the $6m figure was "not beyond the bounds of probability".

Famine fear

The campaign group has condemned Nestle's stance, saying there is no justification for diverting Ethiopian government money to a multinational which made profits of about $3.9bn (�2.4bn) in the first six months of this year.

"We think it is extraordinary that Nestle is trying to claim $6m from a country suffering such severe deprivation," said a spokeswoman for Oxfam.

A successful resolution will re-establish the confidence of international investors, which will be to the benefit of the Ethiopian Government Nestle

Ethiopia, one of the world's poorest countries with average gross domestic product per person of just $100 a year, faces the prospect of its most serious famine since 1984 after drought caused widespread crop failures earlier this year.

Government revenues have also been seriously depleted by a slump in the world price of coffee, the country's principal export.

Settlement hopes

Nestle told BBC News Online it was "clearly in the interest of continued flows of foreign direct investment that such conflicts are resolved according to international law".

"A successful resolution will re-establish the confidence of international investors, which will be to the benefit of the Ethiopian government."

Nestle said the current round of talks had been instigated by the Ethiopian government as part of an effort to settle similar compensation claims from a total of about 50 foreign firms.

According to Nestle, the Ethiopian Government sold the Schweisfurth subsidiary to a local private business for about $8.7m in 1998.

Talks between Nestle and the Ethiopian Government, brokered by the World Bank's Multilateral Investment Guarantee Agency, are continuing.