#10
Izvestia
April 4, 2002
Russia Benefits from "Smart Sanctions"
The U.S. unfreezes $200 million in Russian contracts in the "oil for food" humanitarian program to Iraq
By Natalia Babasian
(therussianissues.com)

The United States has unfrozen $200 million in major contracts Russia signed with Iraq under the "oil for food" humanitarian program. Washington will soon okay more Russian contracts to the tune of $550 million. In this way, the White House is attempting to persuade Russia to support the American plan for "smart sanctions" against Iraq.

The Russian Tekhnopromeksport Company supplied electrical equipment for Iraqi thermal power plants before its $105 million contract was blocked by the United States. This deal is the largest of the "rehabilitated" contracts. Other unfrozen contracts include contracts for the supply of equipment for the food industry, agriculture, the oil industry, hydropower stations and telecommunications.

A few days before Washington decided to accommodate Russian economic interests, the two countries agreed on a list of goods that could be supplied to Iraq under the new regime of sanctions. Baghdad was clearly dismayed by this course of events. Earlier this week Iraq's Vice Prime Minister Tariq Aziz called on "our Russian friends" to oppose the revision of UN sanctions against Iraq. Otherwise, he said, the contracts Moscow had signed with Baghdad would be seriously harmed.

Izvestia notes that Moscow's general stand remains unchanged: it maintains that all sanctions should be lifted from Iraq, but a recent meeting with the Americans produced a compromise. The paper has learned from its sources that Moscow agreed to a revision of the list of humanitarian supplies to Iraq and submitted it to the UN Security Council for approval.

What the list contains is unknown - both the Russian Foreign Ministry and the U.S. Embassy in Moscow have refrained from commenting on it, but according to Izvestia, Washington and Moscow agreed not to disclose the list's content until the UN Security Council's meeting in June. Another debate on the sanctions will be held at that time.

The list's final version will enumerate items barred from Iraq. Washington, for example, is convinced that the ban should cover dual-purpose items, such as trucks, helicopters and optical fiber. It says they can be used both in medicine and for the production of advanced weapons.

Deputy Chairman of the State Duma's International Committee Sergei Shishkarev said in an interview with Izvestia that the UN Security Council's approval of the list will make the implementation of the "oil for food" program much easier. He points out that Iraq has only been allowed to import only medicines and foodstuffs so far, but now it will be free to import furniture, clothes and toys as well. The list of banned imports will include only weapons and dual-purpose items. Both Russia and Iraq stand to benefit from the lifting of import restrictions.

Tariq Aziz maintains that "smart sanctions" will undermine Russia's economic cooperation with Iraq. The paper quotes officials of the Iraqi Embassy in Moscow as saying no American initiatives could be beneficial to Iraq.

According to Mikhail Perfilov, a spokesman at the Russian Petroleum Argus Agency, Iraq is worried by the state of its oil industry. It is suffering from a severe shortage of spare parts, but much of the oil equipment is regarded as dual-purpose items. Perfilov told Izvestia that Iraq will be allowed to export more oil, but oil exports cannot be boosted without new equipment.

Russian oil companies export the bulk of Iraqi oil. They account for 40% of "the black gold" coming from Iraq. LUKoil's press service (the company is regarded as Iraq's leading partner in the implementation of the "oil for food" program) told Izvestia that the company has drawn up a plan for the development of the Western Kurna-2 oil field, but it will not launch it as long as the sanctions remain in force.

Georgy Mirsky, a top researcher at the Institute of World Economy and International Relations, sees Saddam Hussein's unwillingness to allow the UN disarmament experts who were expelled from Iraq in 1998 to enter the country as the main obstacle in lifting the sanctions. He commented: "Tariq Aziz is resorting to blackmail because he knows that Russia has many interests in Iraq. Iraq is being offered an extremely favorable option, which provides for a softening on the regime of trade and supplies, but its government will not hear of it because even 'the smartest sanctions' provide for the return of international inspectors to Iraq, something Hussein does not want to allow. On the other hand, Iraq has got accustomed to dealing with Moscow in the belief that the Russians regard expected benefits from cooperation with Iraq as more important than matters concerning weapons of mass annihilation. But they are mistaken. Whether or not Iraq will have such weapons is a matter of paramount importance to Russia, especially now that the world has become aware of the great threat posed by international terrorism."

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