Russia Drives Hard Bargain on Iraq's Oil Fields in Europe - Interesting News

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Russia Drives Hard Bargain on Iraq's Oil Fields

October 3, 2002
By Carola Hoyos in New York

Russia's biggest oil company has been assured by President Vladimir Putin that it will be able to keep its huge stake in Iraq's oil fields should Saddam Hussein be deposed, as Moscow seeks to extract a heavy commercial price for backing the US's hardline position on Baghdad.

As Washington seeks to win Moscow's approval for a tough new United Nations resolution, analysts said Russia was using its status as a permanent veto-holding member of the UN Security Council to maximise its commercial gain from the situation.

Vagit Alekperov, president of Lukoil, told the Financial Times that Mr Putin had made the issue of Russia's oil concessions in Iraq a top priority. "I have been hearing guarantees from the Russian government," he said. Even if the regime fell, Mr Alekperov said, "the law is the law, the state is still there".

Mr Alekperov said the government had assured him Lukoil would not lose its valuable assets in Iraq's West Kurna oil field, one of the world's largest with estimated reserves of 20bn barrels.

Washington has aggressively sought Moscow's support for a UN resolution that would set tough rules for Iraq's disarmament and possibly open the way for a US military attack. But deep divisions remain, with Russia resisting a new resolution and refusing to give the US immediate authority to strike.

Raad Alkadiri, analyst at PFC energy, a Washington-based consulting firm, said Russia knew the commercial worth of its diplomatic weight. "Russia's strategy in the UN for the last few years has basically been to seek to be courted by the Iraqis, the Americans or anyone else who was willing to give them the best commercial deal and in the past two years the US and Iraq have been fighting over Russia's pocket."

Asked whether he had received assurances that oil was at the top of Moscow's agenda in negotiations with the US, Mr Alekperov said: "Yes, of course."

He added: "We try to understand the political situation, especially these last weeks, and we are engaged in constant dialogue with the Russian government."

Lukoil, in which the Russian government owns a 14 per cent stake, has invested more than any other Russian company in Iraq's oil fields. With a market capitalisation of $13.4bn, Lukoil is Russia's largest oil company in terms of reserves. It holds a 68 per cent stake in the $6bn total investment in the West Kurna field, which lies 62 miles north-west of Basra.

But neither Lukoil nor other companies have been able to bring about their projects in Iraq because of the UN's 12-year sanctions regime. Iraq has used the lure of oil deals to gain political favour with Russia, its key ally in the Security Council.

But if Mr Hussein is overthrown those deals could become worthless.

However, Mr Alekperov said he expected that Washington and Moscow would eventually work out their differences, citing the recent co-operation between Mr Putin and US president George W. Bush since the September 11 2001 attacks.

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