US lifts block on Russian contracts with Iran

Apr 03, 2002 02:00 AM

The US lifted blocks on more than $ 200 mm (£ 140.8 mm) worth of Russian contracts in an attempt to win Moscow's agreement to refocus United Nations' sanctions against Iraq, diplomats said.
The release of the contracts, described as a sweetener, secured Russia's approval -- after a year of protest -- of a list of goods that countries could sell to Iraq without violating sanctions.
Washington is expected to release additional Russian contracts in the next few weeks, lifting the total value of the deal to nearly $ 750 mm, according to one diplomat.

The US had blocked many of the humanitarian contracts on the grounds that they could be misused by Iraq for military purposes. Others were delayed by a lack of information submitted by the seller. A US official, however, disputed that the release of the contracts was linked to last week's breakthrough with Russia, saying the US had been working to reduce the estimated $ 5 bn of contracts that are currently on hold.
The so-called "smart sanctions", which were one of the first Iraq policy initiatives taken by Colin Powell, US secretary of state, refocus current sanctions to ease the export to Iraq of humanitarian goods without increasing the amount of money covertly going to Iraq's regime. Iraq vehemently opposes them.
"The timing isn't totally coincidental," said one diplomat. Another was more blunt saying the decision marked the boldest move yet by the US to use the holds to buy political agreement.

Last June, the US released more than $ 80 mm of Chinese contracts it had blocked in order to gain Beijing's support for an earlier resolution retooling UN sanctions. The US released a contract it had blocked last August. The contract was for $ 105 mm worth of electricity equipment for a thermal power station, to be sold to Iraq by Technopromexport of Russia.
The second largest contract was for $ 58 mm of vehicles for the food-handling sector, to be sold by JSC Hydromash Service, also a Russian company. Other Russian contracts included, $ 34 mm for the agricultural sector, $ 13.2 mm for telecommunications equipment, $ 7.1 mm for bulldozers, $ 3 mm for water sanitation equipment and $ 2 mm in the oil sector.

Overall, Russian contracts released totalled $ 237.5 m, diplomats said. The number of blocked contracts belonging to all countries fell 5 % or by $ 280 mm in the week ending March 29, the UN reported.
The UN's oil-for-food programme allows Iraq to export its crude oil and buy humanitarian products. Any country on the UN's Security Council can block a contract for products going into Iraq. Russia has been under pressure from Baghdad not to go along with the new policy on sanctions.
Russia is Iraq's biggest trading partner and its closest ally on the Security Council.

Source: The Financial Times
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