Publication: Monitor Volume: 5 Issue: 181

Iraqi officials kept up their pressure on Moscow this week both to defy UN sanctions and to begin work developing a major Iraqi oil field. Reports out of Baghdad yesterday indicated that Iraqi Oil Minister Amer Mohammed Rashid had warned a visiting Russian delegation that the state-owned oil company LUKoil risks losing a lucrative contract to develop the West Qurna oil field if it does not start work on the project immediately. The contract in question–said to be worth US$3.7 billion–was signed in 1997. It grants Russia a twenty-five-year stake in half of West Qurna’s reserves. Moreover, Baghdad has reportedly also pledged to grant Russia rights to develop the remainder of the West Qurna field–an additional 10 billion barrels of oil–if Moscow agrees to begin work despite UN sanctions on Iraq. The Russian oil giant LUKoil has been given 80 percent of the development contract; Russian co-partners Zarubezhneft and Mashinoimport have the remainder.

The Russian government has been Baghdad’s most stalwart defender in UN Security Council debates devoted to policy toward Iraq. Moscow strongly opposed last December’s U.S. and British air strikes on Iraq, and has since called for a quick lifting of the UN sanctions against Baghdad. Moscow also favors the establishment of a new arms monitoring regime in Baghdad which would be less intrusive than an alternative plan backed by the United States and Britain. Although Iraq has been publicly thankful for this Russian support, Baghdad has in recent months nevertheless begun to step up its pressure on Moscow to press more forcefully for the lifting of sanctions. In June of this year Rashid unexpectedly gave LUKoil a deadline of a “few weeks” to begin work on the West Qurna field. Otherwise, he said, the Russian oil company risked losing the contract. More recently, on September 23, Iraq’s ambassador to Russia chided Moscow for not doing enough on Baghdad’s behalf, and urged the Russians to move beyond mere “declarations” on the need to lift the sanctions on Iraq (see the Monitor, September 24).

Reports yesterday, however, suggested that the Russian delegation to Baghdad–which was led by Energy Minister Viktor Kaluzhny–had made clear to Iraqi leaders that Moscow is not prepared to violate the embargo on Iraq to ensure retention of the oil contract. Kaluzhny reportedly told his hosts that, in any event, Russian firms currently do not have the funding available to start work on the West Qurna field, and that Western creditors would not extend loans to them so long as the UN sanctions remain active. He reiterated Moscow’s assurances that it would continue to work for a lifting of the sanctions. Kaluzhny reportedly also delivered a letter to Iraqi President Saddam Hussein from President Boris Yeltsin. It was said to have conveyed the same message, and also called for continued improvements in Iraqi-Russian ties (AP, Xinhua, September 30; Itar-Tass, September 30-October 1).

The continued standoff over the West Qurna contract appears not to have had an adverse impact on other Russian-Iraqi discussions in Baghdad. Reports said that the two countries had agreed to expand their cooperation under the UN’s “oil-for-food” program, and Rashid told reporters that Russian companies could expect to continue receiving preferential treatment in the granting of contracts in that area.

Kaluzhny was in Iraq at the head of a large, eighty-man delegation which included representatives from several Russian ministries, the Russian export bank, and various oil companies and organizations. Officials convened under the auspices of an intergovernmental Iraqi-Russian commission on commercial, economic, scientific and technical cooperation. It was the third such meeting of the group (Itar-Tass, September 28-29).