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Russia to Write Off Iraq’s Debt Without Bargaining
The negotiations of Russia’s government with Iraq's Oil Minister Hussein al-Shahristani ended by obvious failure yesterday. With no guaranteed access to the oil wealth of Iraq, Russia confirmed that it would write off $8 billion of $10 billion that this country owes to it. But LUKOIL is still optimistic about the chances to return to West Kurna-2, which is the biggest asset eyed by Moscow in Iraq.
It was Iraq's Oil Minister Hussein al-Shahristani that announced yesterday the results of his Moscow meeting with Russia’s Industry and Energy Minister Viktor Khristenko. According to al-Shahristani, Russia confirmed it would fully execute Paris Club’s decision to write off the debt of Iraq and today’s concern is ensuring some technical procedures. Writing off is conditioned to nothing and Russia’s companies will enjoy no preference in Iraq and bid in the tenders under common conditions, the minister made clear.
Paris Club raised the issue of writing off $140 billion from Iraq after the U.S. invasion of 2003. Russia pressed for conditioning its pardon to reviving the West Kurna-2 agreement but wasn’t backed up by other creditors. So, the agreement of 2004 spells out writing off 80 percent of amount due to Paris Club nations.
The Product Sharing Agreement on West Kurna-2, which reserves are estimated at 3 billion tons to 7.3 billion tons of crude oil was sealed in March 1997 to extend till 2020. Iraq’s share was fixed at 25 percent of production, LUKOIL had 68.5 percent, Zarubezhneft and Mashinoimport – 3.25 percent each. Iraq broke the agreement late 2002, blaming it on LUKOIL’s failure to execute obligations.
But until concluding the bilateral agreement with Iraq, Russia has a chance to bargain for some additional conditions and LUKOIL may use this argument at the talks with Iraq.
The agreement on Iraq’s debt will be inked till this year-end, Deputy Finance Minister Sergey Storchak announced not long ago. Hussein al-Shahristani was expected to deliberate on the terms of the deal in Moscow, but the minister arrived with no authority given to the effect. As a result, Russia was forced to confirm adherence to Paris Club commitments without additional conditions.
www.kommersant.com
All the Article in Russian as of Aug. 10, 2007
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