Moscow criticizes Baghdad's decision to cancel oil contract with Russia's biggest oil company

VLADIMIR ISACHENKOV, Associated Press Writer
Sunday, December 15, 2002
©2002 Associated Press

Russia angrily assailed Iraq on Sunday for its decision to cancel a major oil contract with a top Russian company -- a surprise slap from an ally as Moscow pushes for a political settlement in the Iraq standoff with the United Nations.

Abbas Khalaf, Iraq's ambassador to Moscow, said earlier Sunday that the Iraqi government had severed the 1997 contract with Russia's largest oil company, Lukoil, because it had failed to start work at the West Qurna-2 field.

He shrugged off Lukoil's claim that the deal was hampered by U.N. sanctions against Iraq.

"Lukoil has made no investment whatsoever, it has just signed the contract and left," Khalaf said at a news conference, adding that other Russian companies had worked in Iraq despite the sanctions.

Moscow responded to the cancelation, first announced Thursday, with its harshest criticism of Baghdad to date.

"Such a move can only be interpreted as running contrary to the friendly character of Russian-Iraqi relations and the level of bilateral cooperation in different areas," the Russian Foreign Ministry said in a statement.

The ministry strongly backed Lukoil, saying that "no Russian company can violate the sanctions regime." It said the problem cannot be solved by unilateral action and urged Baghdad to talk to Lukoil to resolve the dispute.

The ministry said Russia was particularly annoyed by the cancellation after its opposition to unilateral U.S. action in Iraq.

"It evokes bewilderment that the step was taken at the moment when Russia was trying to defuse tension around Iraq and striving to solve the Iraqi issue by peaceful political means together with other countries," the statement said.

Russia last month backed the U.N. Security Council's tough resolution demanding Iraq comply with weapons inspectors, but warned the United States against using force without explicit U.N. approval.

Lukoil vice president Leonid Fedun described Iraq's decision to break the contract with his company as "an attempt to somehow influence or even punish the Russian side for its, as Iraq sees it, failure to prevent the U.N. Security Council from voting on sending weapons inspectors to Iraq," the Interfax news agency reported.

Khalaf flatly rejected allegations that the decision had anything to do with politics. He said he was aware of reports that the company was talking to the United States in a bid to secure its interests in Iraq if Iraqi leader Saddam Hussein is ousted, but refused to comment.

President Bush has assured Russian President Vladimir Putin that Russia would be a major player in rebuilding a postwar Iraq -- a promise intended to quell Moscow's fears that a new Iraqi government might renege on Baghdad's $7 billion Soviet-era debt to Moscow and snub Russian firms in favor of U.S. and other Western companies.

Lukoil said Thursday that it had received a letter signed by an Iraqi deputy oil minister that said Iraq was breaking its contract with Lukoil and two other Russian companies, Zarubezhneft and Mashinoimport, to develop the West Qurna-2 field.

Khalaf said Sunday that Baghdad had only severed the contract with Lukoil, while the other two companies were still invited to continue their work.

Lukoil's Fedun said that Lukoil would likely go to court if Iraq implements its decision. He said the contract stipulated that a party to the deal can withdraw from it only if authorized by an arbitration court in Geneva.

Looks like Saddam is playing a very weak endgame. Using blackmail in the endgame of incredibly bad timing. This was a dumb move, akin the Lott's FUBAR attempted blackmail of Bush. Sorry Saddam, you have burned too many bridges. Even the people who 'liked you' now hate you.

The Russians speak of a 'friendly character' of the Iraqi government?????????????????? Friendly as in chechnyan friendly?????????

I swear the Iraqi's are the dumbest peices of waste product ever. It is amazing how stupid their leadership is. Cool, makes things easier for Uncle Sam.

The Iraquis are probably double and triple selling speculative contracts. Since these deals are done in murky back rooms there is not much transparency to them. Sooner or later though, things catch up with the grifters. The Russians have to get even for the double-cross. Or their "business" reputation is mud.

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