#14 - JRL 7169
Bush, Putin to meet in Russia June 1--Diplomat
By Jonathan Wright

WASHINGTON, May 5 (Reuters) - U.S. President George W. Bush and Russian President Vladimir Putin are to meet in St Petersburg on June 1 -- their first meeting since deep disagreement over the U.S. invasion of Iraq, a senior U.S. diplomat said on Monday.

U.S. Secretary of State Colin Powell will visit Moscow next week to prepare for the summit, which was widely expected but has not yet been officially announced.

The diplomat, who asked not to be named, said relations between Moscow and Washington were now in a "renewal phase" after Russia, along with France and Germany, tried to block the U.S. invasion through the United Nations.

"We shouldn't allow the sharp disagreement that we've had over Iraq to get in the way of the cooperation that we've established over the last two years," he added.

The most contentious issue now is under what conditions the United Nations should lift sanctions against Iraq. The United States wants to see Iraqi oil go on sale as soon as possible, while Russia and other opponents of the invasion want to maintain some control over the oil sales system.

"There still seems to be a certain undercurrent of bitterness in the discussion of these issues, despite the emphasis on the need to find pragmatic solutions and to turn the page," the diplomat said.

CONSEQUENCES FOR FRANCE

He said the United States would be more lenient towards Russia than towards France in the aftermath of the disagreements over Iraq.

Washington is more willing to forgive Russia because it had lower expectations of Moscow in the first place, because the Russian government faced a more complex domestic political situation and because Russia is a useful ally against militant Islamists in the Caucasus, the diplomat told a briefing.

The Bush administration has said France will face consequences for threatening to veto a U.N. resolution giving the United States authority to invade Iraq, possibly including a move to reduce French influence in NATO decision making.

"We perhaps expected less from them than from the French. There's a sense that the Russians may have faced more complex crosscurrents and political pressures at home on this issue, and I think there are longer-term issues of still valuing Russian cooperation in the war against terror, dealing with unstable regions in central Asia, the Caucasus," he said.

"All of these factors may have influenced our policy up to this point, but the coming weeks are going to be very important to see whether we can find a practical basis (for agreement) on Iraq," he added.

The United States has assured the Russians that their contracts under the U.N. oil-for-food program for Iraq will remain valid as long as that program lasts. However, it says that other long-term Iraqi contracts are subject to renegotiation with a new Iraqi government.

"A CONSTRUCTIVE RELATIONSHIP"

The oil-for-food program, which gives the United Nations authority to disburse accumulated Iraqi oil revenues, runs out on June 3 but could be extended.

"We have argued that their longer-term interests in Iraq would be best assured by working to find a constructive relationship with the emerging Iraqi authorities and to look ... forward and not to refight the battles that we fought in the Security Council," the diplomat said.

The United States is trying to put together an Iraqi government friendly to Washington. The U.S reconstruction chief in Iraq, retired Lt. Gen. Jay Garner, said on Monday the nucleus of a government could be ready in mid-May.

The U.S. diplomat said the United States wanted to have a common position with Russia on lifting Iraqi sanctions in time for the St Petersburg summit.

Russia had a close economic relationship with the Iraq of vanished leader Saddam Hussein and is owed billions of dollars for weapons and other goods sold to Iraq.