In These New Times

IHT

20th August, 2008

MOSCOW: An Iraqi Cabinet minister invited Russia’s Lukoil on Wednesday to renew its bid on the lucrative West Qurna-2 oil field and urged Russian companies to seek roles rebuilding dilapidated power plants as Iraq searches for foreign investment to revive its oil industry and infrastructure.

“I hope Russia companies will take part in the bidding,” Iraqi Electricity Minister Karim Wahid told a news conference in Moscow. “Lukoil is welcome to bid for the service contract at the second or third stage of the tender in March or September.”

Lukoil signed a contract for West Qurna-2, one of the largest oil fields in the world, in 1997. Former Iraqi dictator Saddam Hussein declared the deal void shortly before the 2003 U.S. invasion. West Qurna-2 is believed to hold 6 billion barrels in proven reserves.

Lukoil’s officials have repeatedly said they continue to consider the contract valid as it was not revoked within the international legal framework. But in a recent interview with the an-Noor newspaper, Iraqi Oil Minister Hussain al-Shahristani referred to the contract as no longer valid.

Wahid and Russian Energy Minister Sergei Shmatko had earlier agreed to set up two working groups to develop power industry cooperation. Wahid also called on Russian companies to bid in tenders to revive the country’s power plants and build new ones.

He said Iraq is eager to renew deals signed in the 1990s and early 2000s. “We are currently reviewing their technical and economic terms, but not their political component,” he said.

The Iraqis are anxious to find foreign investors to help modernize their vast oil industry, which suffered from years of neglect under Saddam’s rule and during the 13 years of U.N. sanctions following the 1990 Iraqi invasion of Kuwait.

Iraq is also anxious to reach out to partners in Russia, China and other countries to avoid relying too heavily on American and British companies. That could feed criticism that the 2003 invasion was aimed at seizing control of Iraq’s oil.

Janusz Bugajski of the Center for Strategic and International Studies in Washington, D.C. said that the timing of the Iraqi announcement was interesting given sharp U.S. criticism of the Russian military action against Georgia, but that who initiated the move was unclear.

“Did someone within the U.S. suggest that Iraq reach out to Russia as a show of good will, or did Russia want to show that they are indispensable in the Middle East, that they are a player?” he said.

“Russia wants to go back into areas where it has lost influence,” Bugajski said. “They might be able to say, ‘We are a responsible player.’ That would certainly counter their image over the past two weeks as a force that can do a lot of damage.”

Increased participation by Russia in Iraq could also be a benefit for the U.S., which has sought help in reconstruction efforts.

“The only danger is if there are deals to sell of some of that infrastructure to Russia, power plants and such,” Bugajski said. “That would come with greater political influence which would not fit in with our policies in the Middle East.”

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Associated Press Writer Robert H. Reid contributed to this report from Baghdad, Iraq.