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Monday, September 24, 2007

Russia Buys Right to Restore Iraq

Sergey Lavrov and Iraq’s Foreign Minister Hoshyar Zebari// For $9 billion
Sep. 20, 2007 Kommersant - Iraq’s Foreign Minister Hoshyar Zebari made it clear that Baghdad is ready to offer Russian companies some preferences in restoring and reconstructing the Iraqi economy, he said during a visit to Moscow yesterday. Sources indicate that access to the Iraqi contracts, primarily in the oil and energy sectors, will cost Russia a minimum of $9 billion as part of a deal to write off 90% of Iraq’s $10 billion debt. Restoring Russian-Iraqi bilateral economic cooperation has been a main theme during Zebari’s visit to Moscow. Discussions began yesterday morning during negotiations between Zebari and his Russia colleague Sergei Lavrov. The Iraqi minister reported that the two sides “have agreed to continue discussing the economic questions as part of an intergovernmental commission, first on the specialist level, then on the level of ministers.” “Our main goal is to sign a memorandum with Russia regarding economic trade cooperation,” the Iraqi foreign minister said. In addition Zebari expressed hope that “in the future we will be able to organize a visit to Moscow for Iraq’s ranking ministers.” “We need the help and support of all influential states, including Russia,” Zebari said. Until recently, according to Moscow, Baghdad’s non-constructive position had hindered bilateral cooperation. Russia argued that contracts won by Russian companies under Saddam Hussein, who was overthrown in 2003, did not require renegotiation. Iraqi authorities, however, insisted that the deals were drafted with violations. For example, contracts for developing oil fields were awarded to Russian companies without tenders. Moscow requested that Baghdad consider its willingness to write off a large part of Iraq’s $10 billion debt. But Baghdad would not budge. “The Russians want access to the Rumeila oil fields in exchange for writing off debt,” Iraqi Finance Minister Baqir Jabr declared in May. “But that’s not going to happen.” In part the Iraqi position is understandable. As a member of the Paris Club Russia took upon itself the responsibility of forgiving 80% of Baghdad’s loans. Russia couldn’t turn back on its obligations, but neither did it rush to write-off the debt. In the end Baghdad came to the conclusion that cooperation with Russia could be mutually beneficial. In part because a significant portion of Iraq’s industrial facilities that are in need of repair and restoration were built by Soviet specialists. “In various regions of Iraq there are thermal hydroelectric stations that we helped to build,” Sergei Lavrov said yesterday. “They are in need of modernization. An entire contingent of our companies is ready to take on this work and the Iraqis have responded to this initiative with interest.” Zebari highlighted that Baghdad is ready to allow Russian companies to restore and reconstruct Iraq. “The Iraqi market is open for competitive participation by all companies. We have no preferences.” As for the oil sector, Zebari announced yesterday his intentions “to meet with the president of Lukoil and discuss questions of renewing the contract for Western Kurna-2.” “I’d prefer not to speak about concrete details, but the restored activity of the intergovernmental commission will be an important step in restoring our cooperation,” the Iraqi minister said. Western Kurna-2 is Iraq’s largest oil field with estimated reserves of at least 3 billion tons. Russia’s Lukoil received the right to refine this vein in 1997, but currently the fate of the contract is not clear.

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