Publication: Monitor Volume: 5 Issue: 186

Approximately one week after his return from talks with Iranian oil officials in Baghdad, Russian Fuel and Energy Minister Viktor Kalyuzhny appears to be putting a different spin on both the results of his negotiations and on Russian economic policy toward Baghdad. Reports published at the close of his visit indicated that the two sides had concluded a package of new deals under which Russian companies would help to rebuild and develop Iraq’s oil sector. The reports had also made it clear that Iraqi officials had stepped up their pressure on Russia during the talks to begin implementing the oil development contracts immediately, without waiting for the lifting of UN sanctions on Baghdad. Russian reports indicated, however, that both Kalyuzhny and Russian President Boris Yeltsin–in a letter handed to Saddam Hussein by the Russian minister–had insisted that Moscow would not act in violation of the UN embargo (AP, Xinhua, September 30; Itar-Tass, September 30-October 1; UPI, October 1; see the Monitor, October 1).

In references to his Baghdad talks made this week, however, Kalyuzhny has sounded far less categorical about Russia’s intention to continue complying with the UN sanctions. On October 4, Kalyuzhny appeared to be quoting Iraqi sources in complaining that Russia had lost some US$9 billion in trade with Iraq by observing the UN sanctions. Apparently based on the same sources, he alleged that the United States and Britain–the two countries most staunchly opposed to an early lifting of sanctions on Baghdad–had themselves earned some US$13 billion in dealings with Iraq. Kalyuzhny intimated that, under such circumstances, Moscow would be foolish not to reconsider its attitude toward economic cooperation with Iraq. He suggested that Russian companies would be more active in Iraq, stopping short only of supplying the Iraqis with military supplies (RIA, October 4).

Kalyuzhny appeared to elaborate on his October 4 remarks in a newspaper interview published on October 6. Based, apparently, on his discussions with Saddam Hussein and Deputy Prime Minister Tariq Aziz, Kalyuzhny charged that the United States, Turkey, Algeria and, to some extent, India (but no mention of Britain), are currently violating UN sanctions against Iraq. He pointed to what he said was Iraqi dissatisfaction with Russian policy in this area, and suggested that Moscow faces the prospect of getting pushed out of the Iraqi market altogether if it does not become more active in the Persian Gulf country right now. Oil is “cheap and easy to obtain” in Iraq, Kalyuzhny continued. “Why should we give up on such a scrumptious morsel,” he asked, when other countries are happily exploiting Iraq.

Kalyuzhny provided no particulars, but appeared to indicate that his talks in Baghdad had yielded an agreement under which the Russian government will decide in two months time to let Russian oil companies work in Iraq. How might this be arranged? “LUKoil is a private company,” Kalyuzhny explained. “What does the Russian state have to do with LUKoil if only 28 percent of its shares belong to the state. It is the right of the LUKoil administration to decide where to work!” (Vremya MN, October 6).

Kalyuzhny’s use of LUKoil as an example is instructive. In June Iraq began what appeared to be a new policy of pressuring Russia when Iraqi Oil Minister Amer Mohammed Rashid warned that LUKoil risked losing a major oil development contract if it did not start work immediately. Baghdad has returned to that threat on several occasions, including during Kalyuzhny’s recent visit to Iraq (see the Monitor, September 24, October 1). Kalyuzhny’s remarks suggest that the Kremlin may be intending to find a way for LUKoil to begin work in Iraq, even if doing so violates the UN embargo. That is especially true if the two-month time-frame reflects reality. Despite some positive movement last month, the UN Security Council remains deadlocked over policy in Iraq, and the chances that it will approve a lifting of the sanctions on Baghdad over the next two months are slim indeed.

On a more pragmatic note, Kalyuzhny also announced yesterday that Russian oil companies had signed some US$57 million worth of deals during the Russian minister’s visit to Baghdad. He provided no details regarding what companies were involved, but did say that the contracts involved the supply of oil production equipment to Iraq (AP, October 7). On October 5, Russian Foreign Ministry spokesman Vladimir Rakhmanin had lamented that–despite Iraq’s urgent need–Russian companies were unable to export oil production equipment to Baghdad because of the UN sanctions (Russian agencies, October 5).