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The price of Russian
support
By Sergei Blagov
 MOSCOW - In the wake of
September 11, the reinvented US-Russian partnership has
been heralded as an end to the Cold War era. However,
Moscow’s recent overtures towards the axis of evil
serves as an indication that Russia still faces immense
challenges on the path toward integration with the West.
In recent years, the concept of a "multi-polar
world" has been Moscow’s favorite mantra, encapsulating
the argument that the US should not be allowed to
dominate the world as a single superpower. However, in
the wake of September 11, the Kremlin presumably came to
realize that building a multi-polar world as a
counterweight to US dominance has not really worked,
while Iraqi or North Korean endorsements did little to
sustain Russia's role as a world power.
In the
wake of September 11, Russia has undertaken a series of
friendly gestures towards the US. Last October, the
Kremlin announced a shutdown of its Cold War era
military facilities, a spy radar station in Lourdes,
Cuba, and a naval base in Cam Ranh Bay, Vietnam, to free
up money for the Russian armed forces.
Russia's
initial opposition to the stationing of American
military forces close to its borders in Central Asia
made its neighboring Central Asian states reject the
idea of letting American forces use their territories
for the operation in Afghanistan. However, Russia
eventually changed its position due to its interest in
seeing the Taliban regime fall, as well as in expanding
its ties with the US.
Russia’s pro-Western
course after September 11 quickly reaped major benefits
for Russia. Notably, last May Russia and the US signed a
legally binding treaty to reduce the two countries'
long-range nuclear weapons by two-thirds and "liquidate
the legacy of the Cold War". In recognition of President
Vladimir Putin's help in the war on terror, the new
NATO-Russia Council gave Moscow a role in drafting and
implementing a number of joint policies. Russia's new
cooperative face secured US backing for Moscow’s efforts
to join the World Trade Organization, and Russia
received full membership in the G8 group of the
industrialized nations.
As well, the US
administration has visibly toned down its criticism of
Russia's use of force in Chechnya. There has even been
talk of revoking the main economic sanction against
Russia remaining from the Cold War, the 1974
Jackson-Vanik Amendment.
But the Kremlin’s
recent series of advances toward Iraq, Iran and North
Korea, could be interpreted as an indication that
Russia’s perceived drift towards the West is far from
irreversible. For instance, on September 2, Russian
Foreign Minister Igor Ivanov, after conferring with his
Iraqi counterpart Naji Sabri, warned that military
action by the United States could entail further
troubles in the volatile Middle East.
Moscow's
involvement in Iraq dates back to the Cold War, when the
Soviet Union cultivated client states in the Middle
East. Thousands of Soviet experts worked in Iraq, and
Moscow used to be Baghdad’s top arms supplier. Russia is
still the largest trading partner of Iraq, which owes
Moscow some US$7 billion in Soviet-era debt. Some
inflation-adjusted estimates put the figure at $11-12
billion. Russian oil companies are doing business in
Iraq and expect more lucrative deals in the future.
Moreover, Russia and Iraq are now negotiating a
10-year trade agreement, including 67 cooperation
agreements in oil, agriculture, transportation,
railroads and energy. Iraq's ambassador to Russia, Abbas
Khalaf, has said the deal is worth $40 billion. However,
neither Sabri nor Ivanov mentioned the proposed
agreement, which was seen by analysts as a "Potyomkin
deal". Presumably, Baghdad attempted to use the $40
billion figure as a bite to press for more Russian
support, while Moscow - by publicizing the figure -
might be indicating that it wants to be compensated for
lost profits following Saddam's demise.
Obviously, Russia is keen to safeguard its
economic interests. Russia is Iraq's largest supplier in
the UN oil-for-food program. Of the $18.3 billion in
oil-for-food contracts approved by the Security Council
since the program began in late 1996, some $4.2 billion
has gone to Russia.
Iraq possesses the world’s
second-largest proven oil reserves, currently estimated
at 112.5 billion barrels, or 11 percent of the world's
total. It is seen as the ultimate bounty by Russia's oil
firms. Baghdad offered Russian oil companies billions of
dollars in concessions during the 1990s as it sought to
build support in the United Nations. LUKoil, Russia's
biggest oil company, signed a 23-year $20 billion
contract in 1997 to develop part of the West Qurna field
in southern Iraq with estimated reserves of some 700
million metric tons. However, the project has remained
frozen under UN sanctions, and subsequent ties between
Iraq and LUKoil deteriorated because the Russian firm
was reluctant to begin work at West Qurna with sanctions
in place. As a result, LUKoil was excluded from the
oil-for-food schemes.
These days Zarubezhneft, a
state-owned oil company that has worked in the Middle
East since the 1970s, has emerged as Russia’s leading
oil player in Iraq. Zarubezhneft has received UN
permission to drill 45 exploratory wells in northern
Iraq's Kirkuk oil field. Zarubezhneft also had a
contract to drill some 100 wells in the North Rumaila
field. Now Iraq is reportedly mulling plans to grant
Zarubezhneft the rights to develop the Bin Umar oil
field with estimated reserves of 3.3 billion barrels.
Another Russian company, Tatneft, is to drill on behalf
of Zarubezhneft at West Qurna after sanctions are
lifted. Additionally, in 2001, state-controlled Slavneft
clinched a deal to develop the Luhais oilfield in
southern Iraq with estimated reserves of some 500
million barrels.
Moreover, Russia is understood
not only to fear losses of the oil concessions that have
been signed off by Saddam. Analysts argue that although
threats of the US military action against Iraq has kept
crude oil prices high - a victorious US war could
presumably entail skyrocketing Iraqi crude exports,
pushing oil prices down. Such a scenario could entail
annual losses of billions of dollars in Russian
oil-export revenues.
It is understood that by
flirting with Saddam’s regime and other "rough states",
Russia is probably signaling the West that its
post-September 11 policy of backing the US has certain
limits, and comes at a certain price, notably when
Russia’s vital oil interests are concerned.
As
recently as July 2002, Russia announced that it intended
to build five more nuclear power reactors in Iran over
the next decade, which was, indeed, a pointed broadening
of the scope of its persistent cooperation with Tehran
in defiance of US pressure to the contrary.
Last
August, Putin agreed to a trip by President Kim Jong-il
of North Korea. Officially, the visit of North Korea's
"Dear Leader" was supposed to boost sluggish bilateral
trade as well as discuss Pyongyang's plans to opens its
part of the railway as a means to funnel South Korean
goods into Europe across Russia.
These actions,
combined with long-standing Russian fears and suspicions
over Western intentions, demonstrate that Moscow still
faces a long path towards full-scale partnership with
its Cold War era foes.
Sergei Blagov
is a contributing writer to the KWR International
Advisor
KWR
International, Inc (KWR) is a consulting firm
specializing in the delivery of research, communications
and advisory services.
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