The Russian Prime Minister, Mr Yevgeny Primakov, received at least £571,000 from the Iraqi government and hindered UN efforts to monitor Baghdad's illegal weapons programmes, the New Yorker magazine reported.
The magazine, in an article by investigative reporter Seymour Hersh, also said the US military attempted to assassinate the Iraqi leader, President Saddam Hussein, during allied air strikes last December.
According to the New Yorker, Mr Primakov has a close friendship with Mr Saddam dating back to the 1960s, when the Russian official was a Pravda correspondent in the Middle East.
UN weapons inspector, Mr Rolf Ekeus, learned how close that friendship was in 1996 when he alerted Mr Primakov to evidence that Russia was smuggling illegal contraband to Iraq, including materials for the Iraqi nuclear programme.
Mr Primakov, Russia's foreign minister at the time, said his government was not involved in any illegal smuggling, and promised to conduct an investigation, Mr Ekeus is quoted as saying.
Mr Ekeus said he never saw the results of any investigation, and that secret codes used by the Russians were subsequently changed.
Then, in November 1997, British intelligence found strong evidence of an $800,000 (£571,000) payment to Mr Primakov by Iraqi deputy prime minister Mr Tariq Aziz, the magazine said.
In Moscow, Mr Primakov's spokeswoman, Ms Tatyana Aristarkhova said she could not comment on the article because she had not seen it.
The New Yorker also said that the December 1998 bombings of Iraq ordered by President Clinton included an assassination attempt on Mr Saddam by bombing two sites where the Iraqi leader allegedly meets his mistresses.
US officials did not immediately comment on the New Yorker report but have denied similar assertions in the past.