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Iraq's Allawi Due in Russia for Oil and Debt Talks

Daily Star-Lebanon
December 6, 2004

Iraqi Premier Iyad Allawi arrives Monday in Russia for the first time since taking office six months ago with hopes of ending the row over Moscow's oil contracts with Saddam Hussein's regime. The U.S.-backed Allawi is to meet Russian President Vladimir Putin when he returns from Turkey, and both sides said the talks would focus on future economic prospects rather than the diplomatic bitterness over the war.

Officials said Russia would try to win back lucrative oil contracts it signed under Saddam Hussein's regime in exchange for Moscow's promise to write off 90 percent of Iraq's $8 billion Soviet-era debt. Iraq tore up most of the oil deals amid confusion over the approaching war and despite furious protests from such Russian oil giants as LUKoil.

Russia had opposed the U.S.-led war, in part over fear of losing its oil interests. "Both sides are discussing the question of expanding Russia's involvement in post-crisis Iraq," said Russian Foreign Ministry spokesman Alexander Yakovenko. This involvement must "include previously signed agreements," he said in a clear reference to the oil deals.

LUKoil, Russia's second-largest producer, had major interests in Iraq under Saddam and is now holding talks with the current Oil Ministry in Baghdad for authorization to extract Iraqi oil. The firm is trying to win back the Iraqi market through U.S. major ConocoPhillips, to whom it sold a 10 percent stake earlier this year under an agreement that the U.S. side would push the Russians' interests in the Iraqi oil industry.

In 1997, LUKoil signed a contract worth several billion dollars to develop Iraq's vast West Qurna 2 field. But it was expelled from the country before the start of the war in March 2003 following disagreements with the former authorities. Iraq's ambassador to Moscow, Abdel Mustafa, told the IRAR-TASS news agency that "Russian companies have great experience in Iraq and many of them are interested in returning to the country." But he gave no hint of any specific agreements, saying only that LUKoil would invite 150 Iraqis to Russia for training in the oil industry.

Separately, the Russian Foreign Ministry said Moscow supported U.S. President George W. Bush's insistence that new general elections be held in Iraq on Jan. 30 despite pressure from some camps to cancel the vote due to the violence. "Elections to the transitional National Assembly will be a major landmark" for achieving democracy in Iraq, Yakovenko said.

The Russian premier is currently in Turkey, having arrived Sunday night from India for a visit during which the two sides will look at ways to further boost progress in trade and increase cooperation in the fight against global terrorism. Putin's brief visit will be the first by a Russian head of state since 1972 and will see the signing of six bilateral deals and a declaration on deepening multilateral cooperation. "Putin's official visit to Turkey is an important milestone in Turkish-Russian relations," Russian Foreign Minister Sergei Lavrov, who will accompany Putin, wrote in an article published in the Milliyet daily on Sunday. "These agreements will prove an important impetus in bringing our cooperation to a new level."

Talks will also focus on the congestion through the Bosporus, a main outlet for Russian oil to world markets. The Russians complain that Turkey is deliberately restricting tanker traffic through the Bosporus at a time when a U.S.-backed pipeline destined to carry Azeri oil via Turkey is nearing completion. Turkey argues the Bosporus is already congested - with one oil or gas tanker passing through every 10 minutes on average - and accidents involving tankers are a potential threat to Istanbul, a sprawling city of 12 million inhabitants bisected by the waterway.

The two sides will also explore prospects of increasing bilateral trade, which was worth $5.1 billion in 2003 and was expected to reach $10 billion by year's end. But Lavrov said there was still potential for development. "There are opportunities to build a closer economic cooperation in Eurasia, to undertake larger-scale energy projects and to modernize industrial facilities in Turkey with our economic help," he wrote in Milliyet.

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