Iraqi debt gives Russia mixed
relief By Sergei Blagov
MOSCOW - In an apparent gesture of goodwill toward
the US-backed Iraqi administration, Russia has pledged
to write off part of the embattled nation's
debt. However, old secrets may resurface during the
process of debt bargaining; Russian companies and
individuals may come under scrutiny in the perennial
United Nations oil-for-food inquiry.
Moscow is ready to begin negotiations with Iraq
on canceling a significant amount of its
multibillion-dollar debt, Russian Deputy Foreign Minister Yury
Fedotov announced last weekend. Russia is "prepared to substantially
reduce the debt and also to reach agreements on the
repayment of the remaining part of the debt", Fedotov
said. However, he conceded that negotiations on the
amount of the debt have not yet begun.
Before
the war, the Kremlin had publicly spoken against the use
of force to oust Saddam Hussein without authorization
from the UN Security Council, where as a permanent
member Russia has a veto. Moscow remains critical of the
illegal invasion and has declined to supply peacekeeping
troops to the US-led coalition in Iraq.
Prior to
Saddam's demise, Russian oil firms had signed contracts
worth US$4 billion with Iraq to develop the country's
oil reserves. The Kremlin had also been discussing with
Saddam's regime a five-year economic cooperation program
worth $40 billion.
However, despite these high
stakes, Russian President Vladimir Putin has stated that
Russia does not wish to see the US defeated in Iraq.
Moscow has also pledged to use its traditional economic
and trade ties with Iraq to help to assist in the
country's recovery.
Russia had
previously said it had no intention of writing off debt
after learning it could not participate in the
US-funded reconstruction projects. However, last December, Russia offered to
reduce Iraq's debt to Moscow from some $8 billion to
$3.5 billion and pledged multibillion-dollar investments in
rebuilding Iraq.
In exchange
for Iraqi debt writeoff, Moscow now expects some
benefits from helping to rebuild the country, notably
oil deals. Russian government and oil-industry officials have made it
no secret that they expect more oil deals in
post-Saddam Iraq, but this is where things might get sticky.
Negotiations on the amount of the Iraqi debt Russia will
forgive could eventually unearth a sensitive issue for
Moscow: allegations of graft in the UN-run oil-for-food
program in Iraq.
Earlier this year, there were
media reports that 46 Russian companies and individuals
allegedly took part in a illegal kickback scheme for
trading Iraqi oil under the oil-for-food program.
Entities linked to the Russian Orthodox Church, the
Communist Party and the Liberal Democratic Party
allegedly took part as well.
After UN
Secretary General Kofi Annan's moves to approve a
corruption probe into the oil-for-food program, Russian
officials and oil companies have denied allegations of
graft, yet Moscow has been lukewarm over the possible UN
investigation into the program.
Russia was
Iraq's largest supplier in the program. Of the $18.3
billion in oil-for-food contracts approved by the
Security Council since the program began, some $4.2
billion went to Russia. Eleven Russian oil companies -
Zarubezhneft, LUKoil, Onako, Sidanko, Sibneft, Alfa Eko,
Zarubezhneftegazstroi, Mashinoimport, Rosneft,
Nafta-Moskva and MES - were buying tens of million
barrels of oil from Iraq in oil-for-food deals.
The scandal, sometimes nicknamed "UNSCAM" or
"oil-for-fraud", has turned ugly in recent months. In
July, Ihsan Karim, head of the Board of Supreme Audit
and the Iraqi official heading the investigation into
the oil-for-food program, was killed in a bomb attack.
Also in July, the US House committee issued a subpoena
for financial records from Banque Nationale de Paris, a
French bank that handled oil-for-food funds. It remains
unclear whether Russian companies are mentioned in Iraqi
audit records, or if they could be subpoenaed in the US.
Russia has been wary of a graft probe into the
UN-run Iraq oil-for-food program as its companies would
be among the first candidates to come under scrutiny.
Russian officials have expressed reservations over the
UN inquiry and described it as a "historical inquiry",
with diplomats arguing that Moscow did not want to look
backward into the history of the old issue of the Iraqi
humanitarian program. Russia has also insisted that
accusations of oil-for-food graft were intended to elbow
the Russians away from Iraqi riches.
As
Iraq's largest suppliers in the UN oil-for-food
program, Russian companies still work on contracts related to
the rebuilding the country's infrastructure under
the oil-for-food program, reportedly totaling about
$1 billion. However, in May Russia ordered all of
its citizens in Iraq to leave the country after the
escalating hostage crisis there. Moscow also blamed the
exodus on the US-led coalition forces' failure to
control the overall security situation in Iraq.
Yet despite some acrimony, Moscow has been
keen not to alienate Baghdad. "We are willing to talk
either with the existing Iraqi government or with the one
to come to power via elections, which we hope will
take place on time in January next year," Fedotov
stated this month. "We are ready to negotiate with the
Iraqi government, as well as authorities due to come to
power following the elections, which, we hope, will be
held in time, in January next year," he said.
Therefore, Moscow has made it clear it would be
willing to deal with any upcoming Iraqi administration.
Yet apart from eyeing Iraqi hydrocarbon riches, Moscow
has been mulling more proactive policy in the region.
Russia has repeatedly called for an international
conference on Iraq. Last June, Russia also revealed a
plan to work out a collective security initiative for
the Persian Gulf region, which would be based on mutual security
guarantees.
Meanwhile,
Russian officials this month indicated plans to
co-sponsor, jointly with Saudi Arabia, an international energy
forum in February. The meeting in Riyadh is supposed
to discuss problems such as perceived oil
market overheating as well as measures to forestall a
possible sharp decline in oil prices. Yet it remains to be
seen whether the joint conference in Riyadh, or
continued volatility in Iraq, could prove instrumental
in preventing a possible oil-price fall.
Based
in Moscow, Sergei Blagov covers Russia and
post-Soviet states with special attention to
Asia-related issues. He has been contributing to Asia
Times Online since 1996. Between 1983 and 1997, Sergei
Blagov spent some seven years in Southeast Asia, mainly
in Vietnam. In 2001 and 2002, Nova Science Publishers,
NY, published his two books on Vietnamese history.
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