Global Policy Forum

By Nick Paton Walsh

Russian oil companies are trying to secure new contracts with Baghdad in an attempt to dominate Iraq's huge reserves and hold Washington to its promise of respecting Moscow's economic interests in the event of a regime change.

Two Russian oil giants, Zarubezhneft and Rosneft, announced yesterday that they were jointly preparing to sign a contract to develop the massive Nahr Umr oilfield in Iraq, which they said contains 3bn tonnes of crude oil - worth an estimated £350bn.

Zarubezhneft's general director, Nikolai Tokaryev, said in an interview with the newspaper Vremya Novosti that they were negotiating how to pay.

"This field is unique, with reserves of about 3bn tonnes," Mr Tokaryev said.

"Every company dreams of such a field. However, its development will require billions of dollars."

Russia has been increasing its control of Iraqi oilfields during the 90s in a bid to control its reserves, the second biggest after Saudi Arabia.

Lukoil, the biggest oil company in Russia, bragged in September that it had received assurances from the Kremlin that their assets in Iraq - a $20bn contract to drill the West Qurna oilfield - would be protected in the event of a regime change.

The statement was swiftly retracted.

Moscow is highly concerned that American oil firms will use the political vacuum of a Pentagon takeover of Baghdad to consider all contracts signed under the Saddam regime as invalid, and take control of the oilfields.

"The Americans won't share this market with anyone," said Mr Tokaryev. "They don't need us there."

President Bush sought to allay those fears last month by saying that the US would respect Russia's economic interests in Iraq.

Yet American oil companies, which have strong historical links with the Bush administration, have made no secret of their interest in Iraq.

The US economy - the world's biggest consumer of oil - is highly dependent on a constant cheap supply of crude, risking recession if the price rises too high.

Analysts have predicted that Iraq, if properly developed with the latest drilling technology, could supply half of America's daily demand of 20m barrels.

But Russia continues to increase its interests in the Gulf state. "This new deal would mean that the Russians dominate Iraq's oil", said Mikhail Krutikhin, an analyst with the consultants Rusenergy.com.

"At present there are only two oil contracts signed in Iraq," he said, adding that one belongs to a Chinese company and the other, for the West Qurna oilfield, is Lukoil's. "Everything else is just negotiations. The firms are continuing as natural businesses, trying to get as much as possible in Iraq before there are any developments."

Mr Krutikhin added that the field probably contained less than 3bn tonnes of oil.