A Decisive Counterretreat
// Russian Business Remains a Hostage in Iraq
People's Friendship
After yesterday's hostage-taking incident involving Russians in Iraq, Russia's Ministry of Foreign Affairs (MID) advised all Russian citizens to refrain from traveling to Iraq, and those already in Iraq were advised to leave the country. At stake in the issue is $1 billion. This is the estimated value of contracts being performed by Russian companies in Iraq. The largest exodus of employees of Russian companies from the country took place in February and March of last year, just before the start of operations by coalition forces to overthrow Saddam Hussein. At that time, more than 2000 people left. Kommersant has learned that this time there will be no repeat of such a large-scale flight: despite the obvious danger threatening their employees, companies interested in a long-term presence on the Iraqi market are prepared to continue cooperating with Iraq's provisional administration.
Evacuees
The start of large-scale unrest in Iraq and a hostage-taking incident involving eight employees of Interenergoservis forced most Russian companies operating in Iraq to revise their plans for their specialists' continuing work in that country. Federal State Unitary Enterprise (FGUP) Tekhnopromexport Foreign Trade Amalgamation (VO Tekhnopromexport), which is constructing the Yusifiya Thermal Power Plant near Baghdad, has the largest number of employees in Iraq. Sergei Molozhavy, chairman of Tekhnopromexport, told Kommersant yesterday that, “The decision to evacuate company employees was made yesterday morning (after information on the hostage-taking emerged – Kommersant). One of the evacuation plans is being activated today.”
A total of 370 people are working on the construction of the Yusifiya plant. Mr. Molozhavy refused to say which of the prepared evacuation plans would be implemented (removal by motor vehicle to Jordan, Iran, or Syria or by plane from Baghdad) “in the interests of employee safety.” In his words, “the company's losses resulting from the evacuation and temporary shutdown of the facility will amount to several million dollars.”
Kommersant has learned that more than 100 employees of the representative offices of OAO KamAZ, Tatneft, VO Zarubezhenergostroi, RAO Mashinoimport, and UTair Airlines left Baghdad within ten days of the start of the Shiite uprising. According to Olga Vdovichenko, president of Mashinoimport, work on the company's present contracts has been turned over to local personnel. “All we're doing now is delivering goods to Iraq. We still haven't been paid for contracts to perform work in the country,” she told Kommersant. According to Igor Blinov, UTair's press secretary, the company sent its employees home in three Mi-8 and Mi-17 helicopters. “We have no plans to return to Iraq at the present time,” Mr. Blinov added.
Aleksandr Zhigalov, marketing manager for OAO Power Machines (Silovye mashiny), told Kommersant that the company will be making a decision to evacuate its personnel from Iraq and suspend operating contracts in the very near future: “Our representative in the country has the authority to make this decision, and he will make a choice based on an assessment of the current situation.” According to Mr. Zhigalov's information, nearly 700 people, many of whom are not Russian citizens, are working under contracts with Russian power companies in Iraq. For example, the Baghdad office of Power Machines employs a Russian manager and another seven Ukrainian specialists.
Power Machines is currently fulfilling a delivery contract for 30 railway locomotives in Iraq; ten of the machines have already been unloaded. “We're already having serious problems due to the uprising,” Mr. Zhigalov said. “The last incident happened just the other day. Two locomotives in special trailers were being delivered to clients through a war zone. Fighters stopped the trucks, because they wanted to requisition them. They weren't interested in the locomotives. However, our Iraqi employees who were accompanying the shipment managed to resolve the situation and the locomotives reached their destination. As a result of these problems our expenses for employee security and contract fulfillment have increased significantly.”
Non-returnees
Interenergoservis, whose specialists were abducted on Monday, has the second-largest number of employees (365 people) in Iraq. The company is fulfilling damage-control contracts at the Dora, Baghdad South and Al-Mussaib thermal power plants and is also supplying equipment for the Nassiriya Thermal Power Station. At Interenergoservis, they explained to Kommersant that three of the four contracts were signed in March, so the specialists had only just started their work.
Unlike Tekhnoproexport, Interenergoservis has no plans to leave Iraq. An anonymous source in the company justified this decision to Kommersant as follows: “If we leave, others will immediately take our place. Tekhnopromexport, for example. Our specialists will be living at the power plants under strong Iraqi guard.” However, no one will be forced to stay in Iraq: the company's representative office in Baghdad has allowed everyone wanting to leave to return home. A source in the company told Kommersant that, “The first group of returnees will fly to Moscow on Friday or Monday. It's hard to say how many specialists will remain on the job.”
At Interenergoexport they refused to reveal how much specialists working in Iraq receive. However, according to Kommersant's information, the average monthly salary of a Russian worker in Iraq is about $1000, most of which is accumulated in salary accounts and paid to the workers on their return to Russia. At one of Interenergoexport's competitors, they told Kommersant that the company had planned to evacuate its staff a week ago, but it was presented with such high “evacuation” estimates that it decided to leave the workers in place. We note that according to an ITAR-TASS report, Tekhnopromexport also suspended its evacuation yesterday evening.
Despite MID's warning, employees of the representative offices of Russian Foreign Economic Association (RVO) Zarubezhneft and LUKOIL Overseas Holding (the company is concerned with LUKOIL's foreign projects) still remain in Baghdad. At Zarubezhneft they told Kommersant that, “The association's office in Baghdad is operating as usual, and its employees are taking all necessary precautions. The continuing presence of Zarubezhneft representatives in Iraq will depend on the future development of events in that country.” Kirill Smolyakov, head of the public relations department at LUKOIL Overseas, noted that, “We don't disclose how many of our employees are working in Iraq; however, the company is considering the necessity of evacuating them.”
Compensation
We note that if something happens to employees remaining in Iraq, they will not be able to count on compensation from insurance companies. Under Article 964 of the Civil Code, insurers are released from paying compensation under a concluded contract in the event of military operations (even if war has not been declared), strikes, terrorism, insurrections, and riots. This means that today most insurance coverage of medical expenses in Iraq is no longer in effect. Armen Sarkisyan, head of the insurance center at VSK Insurance House, told Kommersant that military operations and kidnappings for ransom are not insured on the grounds that they cannot be calculated by actuarial methods (it is impossible to calculate their probability and frequency). Accordingly, it is difficult for companies to calculate the cost of such insurance. “In addition, in the case of Iraq, we can't guarantee the quality of the insurance aid provided,” Mr. Sarkisyan said.
However, in exceptional cases, some companies can include clauses covering risk in case of military operation in a contract. As Dmitry Sharlikov, head of the travel insurance department at Ingosstrax, told Kommersant, “We can conclude an insurance contract with people who are traveling to hot spots'; however, the cost of the insurance will be several times higher.” We note that none of the insurers questioned by Kommersant could confirm whether the captured Interenergoservis employees were insured with their particular company. Even if there was insurance, it had probably become null and void under Article 964 of the Civil Code.
The limited contingent of Russian firms in Iraq >>
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All the Article in Russian as of Apr. 14, 2004
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Photo: Pavel Smertin
