Supporting Iraq War Could Cost Russia Billion$

by Sergei Blagov

Reminders of Russia's interests awaited Putin's return to Moscow. While he was in West Europe, the Baghdad trade minister was telling Russian leaders here how much money there is for them in Iraqi oil.

More than a decade after the Berlin Wall came down, Putin is straddling something of an iron fence. On all sides of it there is much to gain -- and much to lose.

Iraqi trade minister Mohammad Mehdi Saleh announced, as Putin toured Europe, that Russia had lost $60 billion in business due to the United Nations sanctions. He said that despite the loss, substantial new business awaits Russia.

Russia and Iraq are negotiating a 10-year trade agreement that would include 67 agreements in oil, agriculture, transportation, railways and energy, Saleh said. These agreements could be worth more than $40 billion to Russia.

The Iraqi message is clear. There is money for Russia in Iraq, if only it opposes a U.S. attack.

The same day acting oil minister Samir Abdulaziz al-Najem told Russian journalists in Baghdad that he hopes Russia would use its UN veto against any use of force against Iraq.

The oil minister also made two other announcements; one, that the Russian company Lukoil's $3.7 billion project to develop the West Qurna oilfield is off, and second, that another Russian firm could be picked to replace Lukoil.

Russia and Iraq have a history of trading that goes back to the Cold War days. Iraq owes Russia $7 billion in trade debt. It has sought to repay the arrears partly by granting Russia preferential trading status.

With the world's second-largest proven oil reserves estimated at 112.5 billion barrels -- 11 percent of the world total -- an accessible Iraq is big bounty for Russian oil companies.

Russian oil giants also fear a crash in oil prices if U.S. companies move into Iraq. Iraqi oil is of high quality, and easy to produce. That makes it a formidable competition for Russia's own crude of medium quality, extracted at high cost.

The nightmare scenario for Russia remains a collapse in oil prices below $12 to $14 a barrel -- its production cost. Oil fetches half of Russia's hard currency earnings.

With this in view, Communist Party leader Gennady Zyuganov warned Wednesday that U.S. control over Iraqi oilfields would eventually ruin the Russian economy.

"Iraq's true guilt is that this country owns fantastic oil reserves," says Valery Manilov, deputy in the Federation Council, the upper house of Russian parliament. "Russia has to oppose war," he says, "but without confrontation."

That seemed to define Putin's policy. Putin says unilateral action "outside of international law" would be a "grave error". But he told TF1 Television in France that he saw no need for Russia at present to use its veto as a permanent member of the Security Council. But he added that Russia would be prepared to veto "unreasonable use of force."

Putin said "one-sided use of force" would lead to suffering for millions of people and escalate tension in the whole region. But he spoke also against inciting "anti-American feelings."

Putin has said earlier that "if Iraq begins to make problems for the inspectors, Russia could change its position and agree with the United States on new, tougher actions by the UN Security Council."

That statement has been open to diverging interpretations. It was seen as a sign that Russia could quickly change its anti-war stand, as a warning to Iraq to get real and give Russia a chance to defend it in the Security Council, and as an offering of sorts to the U.S.

But through all this, it is clear at least that Russia is opposed to any immediate attack on Iraq.

Putin's position fronts deep differences within the country. Russia should try to mediate between the U.S. and Europe but not play on differences, Vladimir Lukin, deputy speaker of the Duma, the lower house of Russian parliament, told media representatives in Moscow Tuesday.

The influential daily Izvestia cautioned the government against stepping into current rifts within NATO. To play a role here would be to step into a "diplomatic minefield," the newspaper wrote Tuesday.

Everything Russians say on Iraq these days is followed by a 'but' something else.