Milestones : Russia Writes Off $12 Billion Iraqi Debt

RUSSIA/IRAQ

Russia agreed in February to write off $12 billion of Iraqi debt in an apparent effort to help Russian companies including Lukoil to win contracts in Iraq. The debt was taken on by the regime of former leader Saddam Hussein to purchase military equipment and supplies. Russia opposed the US-led invasion of Iraq, a country with the potential to produce more than 5 million barrels of crude oil a day.

Iraqi president Jalal Talabani described the Russian decision to write off the majority of Iraq’s debt as a historic turning point in relations between the two countries. The world’s biggest oil companies are vying to develop oil fields in Iraq, and Lukoil wants to invest $4 billion to develop West Qurna, one of the country’s largest. Iraqi lawmakers are still deadlocked on who will award the contracts and how the revenue will be shared. Iraq’s Kurdistan regional government has been awarding contracts for oil exploration and development in northern Iraq, but the central government says the contracts are illegal due to the absence of an oil law.

The US welcomed Russia’s move, saying it would free up money for rebuilding. The major US and European oil companies are still hopeful of winning major long-term oil contracts in Iraq under open and transparent competitive bidding. It is unclear, however, if a level playing field is possible in a country with a weak and corrupt government.

Iraq awarded $1.1 billion in contracts to Iranian and Chinese companies last October to build two big power plants after the US-led reconstruction effort failed to provide electricity to most parts of the country for more than a few hours a day.

Gordon Platt