NESTLE has come under fire for suing the world’s poorest country for a disputed multi-million payment as its government struggles to cope with one of its worst famines in 20 years.

The Swiss-based multi-national wants compensation from Ethiopia after its ministers sold off a joint business venture they had with Nestlé. Ethiopian officials have offered £1.5million, but Nestlé is insisting on the full £3.7 million it says it is owed.

While Nestlé says the demand is a “matter of principle”, Oxfam says the total money could feed a million Ethiopians for a month.

The row comes only a month after the country’s president, Meles Zenawi, warned that up to l5million people could soon need emergency food aid. Analysts fear the drought-caused famine could prove worse than the 1984 disaster that killed a million people.

Sophia Tickell, a policy analyst at Oxfam, said: “Frankly, Nestlé should be thinking about how the money should be spent on the famine relief and drop the claim altogether.” A Nestlé spokesman told today’s Guardian: “In the interests of continued flows of foreign direct investment, which is critical for developing countries, it is highly desirable that conflicts are resolved according to international law and a spirit: of fairness.” The dispute centres on a deal over a German company, Schweisfurth Group, which had a majority share in the Ethiopian Livestock Development Company (Elidco) that the previous Etihiopian military regime seized in 11975. The government sold Elidco to a local firm for £6.5 million four years ago.