#18 - JRL 7251
RUSSIAN BUSINESS RETURNS TO IRAQ
Moscow, 16 July. /RIA Novosti analyst Marianna Belenkaya/-Russia's role in the post-war settlement in Iraq is a key task for the country's diplomatic corps. Foreign Minister Igor Ivanov has raised this issue during his present tour of the Middle East. The crux of the matter is that Russia had considerable economic interests in Iraq and continues to retain these interests today.
First of all, Russia must now retain its right to fulfil specific contracts within the framework of the Oil-for-Food programme, also providing diplomatic support for the Russian business community's interests under a new Iraqi government, the Russian Foreign Ministry's ambassador at large Alexander Kalugin believes.
Russian companies and the Iraqi authorities signed contracts worth several billion dollars in line with the Oil-for-Food programme prior to the war. Some of those contracts have already been financed, while the UN only approved other documents. Foreign companies' work was brought to a halt under the programme after the war began. Right now, the UN and the US administration in Iraq are trying to list all top-priority contracts that might be called priority and implemented.
Russian diplomats have managed to convince the US side to display understanding of the fact that, if approved, top-priority Russian corporate contracts will continue to be implemented even after the Oil-for-Food program expires on November 21, 2003, and until the sides fulfil their commitments.
The reimbursement of wartime losses to Russian companies is seen as yet another problem. Preliminary estimates show that Russian equipment left behind in Iraq suffered no damage and escaped the bombing raids and looting. Therefore, one can talk about reimbursing those particular companies, whose goods were in transit to Iraq at the outbreak of hostilities. Russian diplomats hope that such corporate contracts will be listed among other top-priority contracts, and that their prices will be modified in line with warehouse-storage expenses and additional insurance premiums. If this does not happen, Russian businessmen will have trouble selling their goods to someone else. In this connection, Russia has noted the need for such corporate compensation packages at the UN and during bilateral talks with the United States, Kalugin noted.
The Russian Foreign Ministry has already received the first list of top-priority contracts, and it includes quite a number of Russian companies. For instance Gidromashservis contracts, those of the Russian Engineering Company, the Russian Food Company, Tyazhpromeksport and other entities were reinstated.
However, it is one thing to reinstate these contracts, but executing them is a different matter. Some objective difficulties can be explained by the inadequate security situation in Iraqi. Moreover, the relevant machinery for delivering various goods to Iraq has yet to be reactivated. The Oil-for-Food programme's regulations allowed exporters to be paid only after the Cotechna authorised company, whose inspectors were posted along the Iraqi border, confirmed the delivery of goods to Iraq in line with specific contracts. Cotechna representatives have not returned to Iraq as of yet, so it is still unclear as to who will confirm specific deliveries and how.
All these issues are being discussed with UN representatives and the occupation authorities in Iraq; the latter are promising to facilitate the implementation of the Oil-for-Food programme in every possible way.
The second aspect of protecting Russian interests in Iraq is linked with the end of this programme's work. The United States has some far-reaching economic-liberalisation plans for Iraq. However, these will not be translated into life instantly and it goes without saying that the new Iraqi contracts will no longer be awarded from above, as was the case under Saddam Hussein. Such contracts will be awarded on a tender basis. Russian companies will face tough competition, particularly in the oil sector. The Russian Foreign Ministry is going to defend Russia's interests; however, businessmen themselves will have to assume the main responsibility. Much will depend on their ability to adapt to a new Iraqi environment.
When talking to RIA Novosti, Mikhail Bogdanov, who heads the Russian Foreign Ministry's Middle East and North Africa department, noted that the future of contracts, which were signed by Russian oil and gas companies, as well as letters of intent, whose implementation was postponed until the lifting of anti-Iraqi sanctions, still remained unclear.
A contract for developing the Western Kurna oil deposit, which was signed by LUKoil, still remains the most ambitious Russian corporate contract on Iraqi territory. According to Bogdanov, representatives of the US administration in Iraq, as well as pro-US Iraqis, are putting delaying consideration of the issue. They explaining their position by the fact that the oil sector should first be reconstructed; the future of previously signed contracts can subsequently be discussed, they say. This will be done by an internationally recognised government of Iraq, which is still nowhere to be seen.
The oil industry will be restored with the help of the Oil-for-Food programme's contracts, as well as by means of new contracts due to be awarded in the course of new tenders. One cannot say for certain if Russian companies will be listed among the winners. Still Moscow is hoping that the competition will be fair in Iraq, and that the results of specific tenders will be based on economic, rather than political, expediency.