#15 - JRL 7206
gazeta.ru
June 2, 2003
Russia's future in Iraq still vague
By Yevgeny Kalyukov

The future of Russian oil contracts in Iraq was among the issues discussed during talks between George W. Bush and Vladimir Putin in St. Petersburg, though the situation still remains unclear. The US president again noted that the decision is to be made by the new Iraqi authorities ''when they are firmly in place''. His Russian counterpart agreed that it is ''a matter of time''.

Speaking at the joint news conference following their talks in St. Petersburg George Bush and Vladimir Putin touched upon the issue of Russia’s prospects in the Iraqi oil sector. The US president did not digress from the US authorities’ position on the matter, which can be formulated as ''neither yes nor no''. Instead of giving direct answers Bush uttered two extremely evasive statements. Firstly, he suggested that the fate of Russian contracts is not a matter for the US to decide; and secondly, that it will be decided sometime in the future by the new Iraqi authorities, when they take office.

In response to a question about the possible work of Russia's oil sector in Iraq, the US president said that this decision is up to the people of Iraq and the new Iraqi leadership. He said that when the new leaders take office, they will solve this problem together with Russia. ''Russia has had a long history of involvement in Iraq, and the Iraqi authorities, when they are firmly in place, will make the decision based upon that experience and based upon their country's best interests,'' Bush said.

The US president passed over in silence the fact that in the months, or maybe even years, to come decisions on all important issues in Iraq will be taken by the US administration.

Seizing the initiative from his counterpart, Vladimir Putin expressed cautious optimism on the matter, although he did not sound very convincing. ''Russian companies, indeed, have good experience of working in Iraq, and we are ready to continue working with the Iraqi administration and to provide Iraq with everything that is necessary, both equipment and our experience, for the rebuilding of the country,'' Putin said. ''We are prepared to provide our experience and resources to rebuild the country,'' he said. Putin did not rule out that Russian companies would work in Iraq, including under the Oil for Food programme.

As regards the long-term prospects and investment projects, Putin said that this is ''a matter of time. We, of course, will discuss that with out partners all over the world, including the United States, and will work on it with the future Iraqi authorities.''

For the time being, all that Russian companies have available to them is participation in the Oil for Food programme. Before the beginning of the US-led campaign up to 40 per cent of all Iraqi oil exports in that programme was carried out through Russian companies (Emerkom, Mashinoimport, Rosnefteimpex, Sidanko, Slavneft, Soyuzneftegaz, Tatneft, Zarubezhneft, etc.), which brought considerable profits.

According to some reports, the total sum of contracts for supplying Iraq with tyres, foodstuffs, medications and other goods amounts to about $4 billion. In line with a UN Security Council resolution, in the next six months the Oil for Food programme will remain under the control of the United Nations, and, despite the interim Iraqi government’s decision to terminate all pre-war contracts and to award the rights to develop the country’s oil riches to the winners of new bids, there is still some hope that some Russian companies will win at least part of those contracts.

As regards the prospects, many questions remain. Russian authorities will continue consultations, and, analysts believe, in exchange for the restructuring of Iraq’s debt to Russia, they will quite likely secure some place for domestic oil firms in Iraq.

It is even possible that Russia will preserve its right to the giant oil field West Qurna-2, the contract for development of which was signed by Russia’s LUKoil and Iraq in full accordance with the law and which can only be rescinded, regardless of all statements by the previous and new Baghdad authorities, through the International Arbitration Court in Geneva. However, it is common knowledge that only a few oil deals agreed upon between Iraq and Russia in the past were signed and hence fully operative. Most agreements concluded by the Russian firms in Iraq have never reached the contract level, and therefore are much easier to terminate than LUKoil’s West Qurna contract.