Asia Times: Russia eyes land of black gold



	February 9, 2000	atimes.com

Central Asia/Russia

Russia eyes land of black gold
By Sergei Blagov

MOSCOW - Moscow's efforts to have United Nations sanctions against Iraq lifted almost stumbled and fell after a Russian tanker, suspected of smuggling Iraqi products was detained in the Gulf of Oman.

On February 2 a United States guided-missile cruiser, Monterey, boarded the Russian tanker Volgoneft - 147 and took samples of the oil cargo for analysis. The cruiser was operating as part of a multinational force charged with preventing the smuggling to and from Iraq of goods banned by UN sanctions imposed after the 1990 invasion of Kuwait. US experts say the oil samples were of Iraqi origin, a claim denounced by the ship's owners, Transpetro-Volga who insist their cargo is legal Iranian oil.

The Kremlin says it is not responsible for a private firm but has sent a formal demand for the oil tanker's release. The Russian government is also insisting on a second analysis of the samples to be conducted by independent experts.

To highlight Moscow's unhappiness over the incident, the Russian navy reportedly leaked plans of sending a reconnaissance ship to the Mediterranean Sea.

Political analysts say Moscow is keen to restore traditional ties with Baghdad as Russian firms eye lucrative oil projects in Iraq. Some companies have reportedly already signed deals with Iraq with an eye to the future.

Moscow, a major arms supplier to Iraq in Soviet times, is interested in maintaining good relations with Iraq to ensure that Baghdad eventually repays Soviet-era debts, estimated at $7 billion.

UN sanctions against Iraq prohibit oil exports, except for a limited amount of crude oil, that is allowed to be sold to fund humanitarian supplies. The UN oil-for-food accord reached in December 1996 allows sanctions-hit Iraq to export $2 billion worth of oil every six months, in two 90-day periods, to finance imports of food and medical supplies. The accord represents the first easing of an oil embargo imposed on Baghdad for its August 1990 invasion of Kuwait.

Russia has been in the forefront of negotiations with Iraq under sanctions, although Moscow has been at pains to point out that it will not start any concrete work while sanctions are still in place. And Iraq has made it clear that when sanctions are lifted, there will be advantages for those countries whose governments have been most active in arguing for an early end. The prize, analysts say, will be the chance to participate in the development of Iraqi reserves set as high as 300 billion barrels.

Eleven Russian oil companies are reported to have been buying tens of million barrels of oil from Iraq's state oil company SOMO under the UN oil-for-food deal. These include Zarubezhneft, Russia's state oil company, which is tasked with coordinating purchases from Iraq. The contracts with SOMO were signed by Russia's biggest oil firm Lukoil, as well as Onako, Sidanko, Sibneft, Alfa Eko, Zarubezhneftegazstroi, Mashinoimport, Rosneft, Nafta-Moskva and MES. ''We are working to develop our cooperation as far forward as possible while sanctions are still in place, so deals can be signed without delay and work start immediately as soon as they are lifted,'' says Sergei Omelchenko, spokesman for Zarubezhneft.

A deal to develop the West Qurna oil field was signed in March 1997 between Iraq and a Lukoil-led consortium, including Zarubezhneft and Russia's Mashinoimport, on developing the field. Under the $3.5 billion agreement, the Russian group will develop reserves put at 7 to 8 billion barrels. But Omelchenko states that the project will develop only in the event of the lifting of UN sanctions.

''Lukoil is ready to start oil extraction at the West Qurna oil field,'' says Lukoil's vice president Leonid Fedun. He told IPS that between 20 million and 30 million metric tons a year could be produced by Lukoil in Iraq, if and when the UN sanctions against Iraq are lifted.

In 1999 Lukoil, with its 15 billion barrels of oil reserves, pumped some 68 million tons of crude - or roughly a quarter of Russia's total output.

Lukoil announced pre-tax profit of some $1 billion for this period. The Iraqi side is understood to be hoping Russia will exert all possible influence to lobby for the lifting of the sanctions, which currently ban trade with Iraq. Lukoil has urged the Foreign Ministry to argue more actively against United Nations economic sanctions on Iraq. ''Russia's Foreign Ministry must have a more pro-active position regarding sanctions,'' Fedun said.

However, in the wake of the oil smuggling incident analysts say it will be tricky for Russian diplomacy to lobby against sanctions. Furthermore, the Kremlin and the West have a history of disagreements over Iraq. Russia has repeatedly denounced US and British missile strikes against Iraq over recent years, arguing the action violated the United Nations' charter.

Moscow also has questioned the role of UN inspectors charged with destroying Iraq's chemical, biological and nuclear weapons programs. The Russian government has consistently dismissed allegations that Moscow is allowing military technology to reach Iraq in violation of UN sanctions.

However, in November 1995, the Jordanian authorities intercepted more than 100 sophisticated gyroscopes for intercontinental ballistic missiles - allegedly shipped from Moscow. The sensitive devices, which keep missiles on target, had been removed from the command modules of Russian SS-N-18 submarine-launched ballistic missiles being destroyed under arms control treaties. The Russian authorities denied any involvement.

Analysts argue that the Kremlin, with its eye on billions of dollars of potential oil revenue, is desperate to maintain a good relationship with Iraq. But this had to tackled diplomatically, without confronting Moscow's Western partners. It remains to be seen whether this contradictory task can be fulfilled.

(Inter Press Service)