Iraqi Foreign Minister Zebari meeting Russian Foreign Minister Lavrov in 2004
Photo by: China Daily
On Thursday Iraqi Foreign Minister Hoshyar Zebari met with Russian Foreign Minister Sergei Lavrov in Moscow. The topic of discussion was reopening Iraq to Russian companies eager to reconstruct the war-torn country's delapidated infrastructure. Mr. Zebari declared that "our main goal is to sign a memorandum with Russia regarding economic trade cooperation". Mr. Lavrov pointed out that much of Iraq's infrastructure was designed by Soviet engineers in the 1970s and that Russia has a lot to offer in terms of restoring and modernizing equipment and buildings.
The main sticking point in the negotiations, according to Kommersant, remains Moscow's offer to forgive $10 billion in Iraqi debt leftover from the Saddam era in exchange for restoring Saddam-era contracts signed to redevelop Iraqi oil fields. The current Iraqi government is sensitive about mineral rights, but wants Moscow to write off 80% of Iraq's debts to Russia in return for oil field concessions.
According to the International Herald Tribune, after his talk with Lavrov, Foreign Minister Zebari told reporters, "The Iraqi market is open for competition of companies from all countries, and we have no special attitude for or against Russian companies." On the other hand, Russia Today quoted Zebari declaring, "Lukoil is one of the leading oil companies in the world. It has a project for oil extraction in Iraq. This project started when Saddam Hussein ruled the country but it was stopped. We discussed everything with the head of Lukoil and we tried to find spheres of co-operation in oil extraction and refinement. The projects which had started before us must be renewed."
Mr. Zebari, an ethnic Kurd, is well aware that Iraqi Kurdistan is miles ahead of non-Kurdish Iraq in attracting foreign investment and rebuilding infrastructure. The autonomous Kurdish regional government in Erbil recently announced a major production sharing deal with Dallas, Texas based Hunt Petroleum.
As Russia Blog previously reported, many Russian companies are already operating inside Iraq and have been working in the country for nearly four years. Privately owned Russian An-124 heavy transport planes are making regular scheduled flights into Basra. The Houston, Texas-based energy giant Conoco Phillips currently owns 20% of OAO Lukoil (for its part, Lukoil owns 400 gas stations in the U.S. Northeast). Since 2004 Lukoil and Conoco Phillips have maintained a joint venture to renegotiate Lukoil's Saddam-era contracts with the new Iraqi government, including the redevelopment of the West Qurna oil field in southern Iraq. The investment banking advisors on the JV have been CreditSuisse and Citigroup. Lukoil was has also been represented by the international law firm of Akin Gump Strauss Hauer & Feld LLP.
It remains to be seen whether the Iraqi government will be able to pass a national oil law, and, more importantly, if it will be capable of enforcing the law in the face of rampant theft by Shi'a militias and sabotage by terrorists. However, in spite of the Kremlin's opposition to the U.S.-led campaign to topple Saddam Hussein and possible U.S. military action against Iran, today many leading Russian companies are directly involved in rebuilding Iraq and Afghanistan.