Russia & Iraq talk energy and debt

Russia's acting Foreign Minister Sergey Lavrov has met his Iraqi counterpart Hoshyar Zebari in Moscow to discuss the conflict settlement process in Iraq. The ministers discussed preparations for the next round of multilateral talks on Iraq, which are due

A Memorandum of Mutual Understanding was signed during the meeting – a document demonstrating the strengthening of the diplomatic ties between the countries. But unofficially, the Iraqi Foreign Minister is on his third visit to Moscow to map out along with his Russian counterpart a place for Russia in the Iraqi energy sector.

“Traditional areas of our co-operation have been in the oil and gas and energy sectors. Mr Zebari has confirmed Iraq is interested in Russian companies getting more involved in restoring that side of Iraqi industry,” said Sergey Lavrov at a news briefing. 

Russia has several in mind: a north-to-south pipeline and a Syria-bound pipeline, to name a few. 

Russia also has an eye on West Qurna, a giant oil field in southern Iraq, which under a 1997 deal between LukOil and Saddam Hussein’s government was to be jointly exploited over the period of 23 years. The deal was cancelled in 2002, but Russia’s ambitions remain.

Men in power in today's Iraq – like Mr Zebari who, used to live abroad in opposition to Saddam – say no contract signed during his era can be deemed valid. But Russia believes Russian companies like LukOil and Slavneft, who used to have offices in Baghdad, should have a business preference. 

Throughout the 1990s Iraq exported a large portion of its oil to Russia under the UN’s Oil-for-Food programme. That changed, though, after the U.S.-led invasion.

“Russia has largely lost Iraq. Western companies now have the advantage of taking over much of the country’s exports. However, Mr Zebari’s visit shows Iraq needs Moscow,” explains Middle East expert Elena Suponina.

Russia is owed some $US 7 to 10 billion debt accumulated from the Soviet-time arms deals. Iraqi oil production is now at 2 million barrels a day, which is enough to meet local demand.

Potentially, production could be increased fourfold enabling export to resume. Before that can happen, however, there's an important prerequisite.

“We seek progress in security situation in Iraq. As I have told Mr Lavrov, we consider Russia as an important guarantor of stability in the region,” said Mr Zebari. 

The Russian side stands ready to write off Iraqi debt at least partially, but it also wants to secure business for the Russian companies on the Iraqi energy market.

In August, Iraq’s oil minister made it clear that his country wouldn’t accept debt-for-oil swaps, which aggravated Moscow. 

Experts believe Mr Zebari’s mission this time around is to smooth out the corners.