US moves to allay Russia economic concerns on Iraq By Carol Giacomo
WASHINGTON, Nov 23 (Reuters) - With a statement this week by President George W. Bush, the United States has moved to allay what some experts believe is Moscow's top Iraq-related concern, ensuring Russian economic interests are respected if Saddam Hussein is overthrown.
Until now, U.S. officials seeking Russian support for America's Iraq policy have provided general assurances in private that Russia could count on recouping debt from, and continuing lucrative oil business with, the government in Baghdad, if a new leadership comes to power.
Bush took such assurances to a more formal and public level when he told Russia's NTV Television on Thursday that if there is regime change in Baghdad, "we fully realize that Russia has economic interests in Iraq, as do other countries."
"Of course, these interests will be taken into account," he added.
Bush did not spell out exactly what that means. U.S. officials say there are too many variables in Iraq's future and argue it's not up to Washington to parcel out Iraqi resources.
But analysts said the president's public comments were an important sign that Russian interests will be protected, meaning oil contracts will be honored and debts repaid.
"It's significant," said Russian expert Celeste Wallender.
"I think it's not hard and fast, but a pretty solid indication, that the U.S. position is going to be that those (Russian oil) contracts are legitimate" even after Iraqi President Saddam Hussein has left the scene, said Wallender,
Russia/Eurasia program director at the Center for Strategic and International Studies.
DEBT, OIL
After much debate, Russia backed a U.S.-sponsored U.N. Security Council resolution adopted Nov 8 that gives Iraq a "final opportunity" to disarm or face a U.S. threat of war.
Russia has been concerned that if Washington takes action to oust Saddam, billions of dollars in contracts and agreements signed by Saddam's regime with Russian oil firms to develop Iraq's oil fields will be deemed moot, allowing American and other western companies to benefit.
Also, Iraq owes Russia $8 billion plus interest for an estimated total of $12 billion.
"The main imperatives behind Russia's policy on Iraq have been and remain clearly economic and geoeconomic," according to Ekaterina Stepanova of Moscow's Institute of World Economy and International Relations.
Russia has a $3.5 billion, 23-year deal with Iraq to rehabilitate Iraqi oilfields, including the West Qurna field, one of the world richest deposits, she said in an analysis.
Also, Iraq previously has announced that it was inclined to favor Russia over France and other contenders for awarding development rights to two other fields, Majnoon and Nahr Umar.
In the past two years, Russian oil companies Lukoil, Tatneft, Slavneft and Zarubezhneft controlled one-third of Iraq's multi-billion dollar oil export market, she said.
In 2001, Russia received the largest share of Iraq's contracts -- up to $1.3 billion -- under the United Nations' oil-for-food program, which allows Iraq to sell oil only to buy supplies for Iraqi civilians, Stepanova's analysis said.
Iraq's oil exports are controlled by the U.N. in this way because of sanctions imposed after the 1991 Gulf War.
While dismissing questions about the future of Russian oil contracts with Iraq as hypothetical at this point, deputy spokesman Phillip Reeker told reporters on Friday: "I think obviously legitimate contracts are something that the United States and the international community takes quite seriously."
Use of the word "legitimate" could be important. Some U.S. officials have privately questioned how many of the Russian deals with Iraq would meet that criteria.
Members of the Iraqi opposition, who are keen to be part of any new government that succeeds Saddam, have said they would reconsider oil deals signed by Saddam, and just what impact they would have in this regard is unclear.
PRICE STABILITY
Moscow worries that a U.S.-led war in Iraq and a surge of western oil companies into the country could collapse the price of oil, with a severe economic impact on Russia.
The Washington Post, citing a high-ranking Russian foreign ministry official, reported on Friday that Moscow and Washington had a "gentleman's agreement" to maintain oil at around $21 per barrel. Oil prices have been at $25 per barrel.
A State Department official played down the possibility of such a deal. He said the United States cannot control the oil markets and that, at least in the short term, Iraq has limited ability to increase production, so any sudden dumping of oil that could spike the price is unlikely.
He did, however, reiterate Washington's keen interest in maintaining stability in world oil markets.
Wallender said this commitment to stable prices is more significant in Russian terms than it might seem because "there are ways of affecting the global price of oil" through the production of key countries like Saudi Arabia and Russia.
She said she believes the United States is now on board to ensure Moscow is fully reimbursed for Iraq's debt, although there likely would be negotiations on the interest rate and repayment schedule.
Other noteworthy U.S. moves are an Ex-Im Bank promise to guarantee loans for building Russia's oil production infrastructure and a joint statement by Bush and Russian President Vladimir Putin on Friday that includes U.S. endorsement of Russian plans to build a deep water port for energy exports, she said.