MOSCOW NIXES BRITISH-U.S. “SMART SANCTIONS” PLAN.

Bush administration hopes of reshaping and reenergizing the UN sanctions regime against Iraq were frustrated this week when a Russian veto threat forced the United States and Britain to at least temporarily abandon efforts to win UN Security Council approval of their so-called “smart sanctions” plan. Some commentators saw the failure as a significant diplomatic defeat for the administration, which has made the revitalization of sanctions against Baghdad a high priority. Abandoning the smart sanctions plan, and the related British-U.S. decision to instead back a five-month extension of the existing UN “oil-for-food” program, seemed also to reflect a failure in the administration’s dealings with Russia. Amid a general warming in relations between the two countries, and in the wake of a friendly Russian-U.S. presidential summit meeting on June 16, there had been some hope that Moscow might line up with other Security Council member states behind the British-U.S. draft. That hope was strengthened back on May 31–in the leadup to the Russian-U.S. summit–when Moscow got on board a one-month extension resolution that gave London and Washington additional time to push the smart sanctions proposal. But a new hardening in Moscow’s position was spelled out in a letter sent late last month from U.S. Foreign Minister Igor Ivanov to his U.S. counterpart, Secretary of State Colin Powell (see the Monitor, June 28). The letter reportedly threatened a veto of the smart sanctions plan, and set in motion the chain of events that led Security Council members on July 3 to instead unanimously approve the five-month extension of the oil-for-food program. That move came despite the fact that British and U.S. diplomats had lined fourteen of the fifteen Security Council member states up behind the smart sanctions plan, and had even won the support of the two countries–China and France–which in the past had most often sided with Moscow in deliberations devoted to the Iraq sanctions.

Ivanov’s June letter to Powell, and subsequent developments in Russia, appeared to make it clear that the Kremlin’s opposition to the smart sanctions plan was motivated at least in part by financial and domestic political considerations. Ivanov’s letter spoke of Moscow’s belief that the smart sanctions plan represented a “major threat to Russian trade and economic interests in Iraq.” Financial concerns of this same sort were the basis of an appeal sent by Russian lawmakers and representatives of major oil companies to President Vladimir Putin on June 25. It complained that the British-U.S. draft plan would “seriously harm Russian economic interests” and would compel Russian companies “to totally end their activities on the Iraq market.” With these proclaimed concerns in mind, a group led by ultranationalist Vladimir Zhirinovsky and that included Russian lawmakers and representatives of Russian businesses active in Iraq embarked on a visit to Baghdad on the eve of the July 3 UN vote. There they reportedly had their suspicions officially confirmed that Iraqi authorities would indeed resume oil exports only if the British-U.S. draft proposal were defeated and the existing “oil-for-food program” reinstated without change. Russian companies export nearly 40 percent of Iraq’s oil under the oil-for-food program, and the arrangement, which has been enormously profitable for them, is one that they wish to continue. Russian political and business interests, meanwhile, also claim to fear that the British-U.S. smart sanctions plan would really open the way to an indefinite extension of the UN sanctions regime on Iraq. And that would mean, in their view, that Russian companies might never be able to tap into the even more lucrative development contracts that they have signed with the Iraqi authorities, and that cannot be realized under sanctions are lifted. Russian officials claim to see, in other words, that Russia would be the big financial loser if the British-U.S. draft resolution were approved, insofar as it would see a curtailment of profits currently being earned under the oil-for-food program without the hope that a lifting of sanctions might open the way to realizing longer-range Russian-Iraq energy development contracts.

Moreover, there were indications this week that Moscow is unlikely to go along willingly with British and U.S. intentions of using the recently approved five-month extension of the oil-for-food program to continue their push for acceptance of the smart sanctions plan. Russian reluctance in this area was reflected in an intense battle over the wording of the extension resolution passed on July 3. Russian diplomats fought doggedly and up to the final moments to remove references in the extension resolution to the smart sanctions plan. Those references would have served British and U.S. interests by officially committing the Security Council in the coming months to resume discussion on the smart sanctions program. But a senior Russian diplomat was quoted during the July 3 negotiations as saying that inclusion of these references is “completely unacceptable for Russia” and as criticizing what he referred to as a “new attempt in the draft resolution to oblige the Security Council to discuss ‘smart sanctions.'” In the end, Moscow was able to ensure that only one oblique reference to the Anglo-American plan was included in the extension resolution (Washington Post, The Guardian, Reuters, Nezavisimaya Gazeta, July 3; AP, Reuters, July 4).

Iraqi authorities, meanwhile, who are themselves adamantly opposed to the British-U.S. draft resolution, welcomed the de facto Russian veto of the proposal and indicated that Russian companies would benefit financially from the actions of the Russian government. As suggested above, the financial stakes involved in the maneuvering over the sanctions plan are not inconsequential, and Iraq has moved adroitly to exploit the economic advantages that it is in a position to offer. French companies, for example, which had earlier profited enormously from their own government’s support for Baghdad, have seen their Iraq-based revenues plummet over the past year as Paris adopted a less accommodating posture toward Baghdad (AFP, July 3-4; Washington Post, July 3; Reuters, July 1, 3). Moscow has been faced with similar threats over the past several years, and despite indications this past spring that it might be shifting toward taking a firmer line toward Baghdad (see the Monitor, April 17, 25), appears now to have decided that it does not want its companies to share the fate of their French counterparts.

Yet the Kremlin’s current policies may also be painting Moscow into something of a corner. As the only member of the fifteen-member UN Security Council to oppose the smart sanctions plan, and having apparently lost the backing of China and France, the two permanent Security Council members who most often lined up with Russia on issues related to Iraq, Moscow appears to have isolated itself. At the same time, an alternative to the smart sanctions resolution tabled at the Security Council by Russia seems to be a non-starter. The Russian plan, which calls for suspending the sanctions against Iraq shortly after UN arms inspectors are allowed back into the country by Baghdad authorities, has not even been discussed by council members. More to the point, it appears to ignore the fact that Baghdad has announced its categorical opposition to any return of the arms inspection teams. As Britain’s UN Ambassador Jeremy Greenstock put it, “there might be more credibility” to the Russian approach if Moscow could actually persuade the Iraqi government to accept the inspectors. But Russia seems in no position to accomplish that, and, in the meantime, according to Greenstock, it is “illogical” for Moscow to block the humanitarian improvements for the Iraqi people that are contained in the smart sanctions plan (AFP, June 28; AP, July 4).

At least one Russian source, meanwhile, has suggested that the Kremlin is actually angling for a bargain whereby it exchanges Russian backing of the smart sanctions plan for an agreement by Western countries to reschedule Russia’s foreign debt (Vedomosti, July 4). But if there is little to suggest that a deal precisely of this sort is in the offing, it is nevertheless not beyond the realm of possibility that Moscow might be at least leaving open the possibility of using the Iraq sanctions issue as a bargaining chip in negotiations with the United States of the West more generally on some seemingly unrelated issue.

GUSINSKY’S MEDIA-MOST NOW IN GAZPROM’S HANDS.