Russians write off Iraqi debt for oil

Dec 31, 2003 01:00 AM

Russia's second-biggest oil company is poised to revive a multibillion-dollar deal to develop an Iraqi oilfield after President Vladimir Putin agreed to write off more than half of Iraq's debt to Moscow. A delegation led by Andrei Kuzyayev, overseas president of LUKoil, visited Baghdad for talks with the Iraqi Oil Ministry on implementing a $ 3.7 bn deal that was signed in 1997 but was scrapped by Saddam Hussein last year.
The meeting follows talks in Moscow between Mr Putin and members of the Iraqi Governing Council, at which the Russian leader offered to cut Iraq's debt from $ 8 bn to $ 3.5 bn in return for favourable treatment of Russian companies.

Russia, one of Iraq's key economic partners and creditors under Hussein, opposed the US-led war to topple his regime but has since lobbied hard for Russian businesses, especially those involved in the oil industry, to be allowed to take part in the reconstruction of Iraq.
The US upset Moscow this month by announcing it would allow only companies from countries that took part in the war to bid for $ 18 bn worth of Iraqi reconstruction contracts. Since then, however, Iraqi officials have indicated Russia is in a good position to revive its pre-war contracts, and during the talks in Moscow, the president of the governing council, Abdul Aziz al-Hakim, met Vagit Alekperov, the LUKoil chairman.
"This is a great company, which has been working a great deal and successfully in Iraq," Mr al-Hakim said. "Today, when we must start developing our oil industry, LUKoil’s experience could be of great benefit."

No agreement was signed, but Mr Alekperov said Mr al-Hakim's visit to Moscow had made him confident the deal would be implemented. "We view this meeting as the beginning of realisation of our contract in Iraq," he said.
LUKoil would contribute to stability in Iraq by creating 6000 jobs if it resumed operations, Mr Alekperov promised. Company officials declined to give further details. "It seems they are more or less agreed," one Moscow-based diplomat said. "Russia has been pushing hard for this. This is the payback for the concession they have offered on the debt issue."

Russian firms signed contracts worth $ 4 bn with Hussein's government to drill wells, deliver equipment and develop Iraq's vast oil reserves, the second largest in the world after those of Saudi Arabia. But the sanctions imposed on Iraq after the Gulf War in 1991 intervened.
The most notable deal was a $ 3.7 bn contract signed in 1997 between the Iraqi Oil and Gas Ministry, LUKoil and two smaller Russian firms to develop a field with reserves estimated at up to 20 bn barrels of oil. Hussein's government scrapped the deal in 2002, saying LUKoil had failed to start work and was seeking US guarantees to keep the field should a new government come to power.

Source: The Times
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