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Russia strikes oil deal with Iraq
MOSCOW, Russia -- Iraq has signed a multi-billion dollar deal with Russian companies to develop oil sites in the Western Desert in an apparent snub to France. Relations between Moscow and Baghdad have been strained on the economic front after Iraq cancelled a key oilfield contract with a Russian company last December. But Iraq signed a new development deal on Friday with Stroitransgaz, a Russian oil and gas construction company worth $3.4 billion to develop block four in Iraq's Western Desert. It also initialled two more and started negotiations with Zarubezhneft, Russia's umbrella company for state holdings abroad, on the giant Bin Umar field, Reuters news agency quoted Iraq's oil ministry as saying. The news will come as a shock to French oil major Totalfinaelf which has long been earmarked for the $3.4 billion Bin Umar development, alongside another big prospect, Majnoon. The initialled contracts were with Soyuzneftegaz for the 100,000-barrel-a-day Rafidain field in southern Iraq and with Tatneft for block nine in the Western Desert. The deals, signed by Russia's deputy energy minister Ivan Matlashov and Iraq's oil ministry undersecretary Hussein al- Hadithi, provide a boost to political relations as Baghdad seeks to prevent a military assault by the United States. Moscow is Baghdad's closest ally on the United Nations Security Council and analysts said the deals were an attempt by Baghdad to mend fences. "I would interpret these deals as Iraq desperately trying not to lose what little support they may still have," Paul Collison, energy analyst at Brunswick UBS Warburg in Moscow, told Reuters. The deals come after the cancellation by Iraq of the prized contract for its biggest prospect, West Qurna. Rights to the $3.7 billion development were held by LUKOIL until mid-December when Baghdad pulled the plug, saying the Russian company had failed to meet the terms of the deal by not starting development work. Matlashov said there was now new hope the field could be restored to LUKOIL. "The door is still open for LUKOIL," he told reporters after Friday's signing ceremony. "We don't want Iraq to give the contract to another company." Hadithi said: "Iraq has postponed giving the contract to another company whether from Russia or any other country. But Russian firms have priority in signing contracts with Iraq." After the West Qurna cancellation there was speculation that the Iraqi authorities had taken offence at contact between LUKOIL chief Vagit Alekperov and Iraqi opposition leaders. Since the cancellation, long-standing Iraqi oil minister Amir al-Rasheed has been replaced by Samir al-Najm, an old hand from the presidential office. Iraq's oil reserves are only second to Saudi Arabia's, drawing much attention from companies in China, France, Turkey, Britain, Vietnam, South Korea, Italy, Spain and Malaysia and Canada. United Nations sanctions forbid any investment in Iraq until the lifting of Gulf War sanctions. Hadithi said he was confident that Stroitransgaz would start work during the embargo. But Matlashov said implementation depended "on current conditions we are passing through," a clear reference to sanctions.
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