Guided by American legal advisers, the Iraqi government has canceled a controversial development contract with the Russian company Lukoil for a vast oil field in Iraq’s southern desert, freeing it up for potential international investment in the future.
In response, Russian authorities have threatened to revoke a 2004 deal under the Paris Club of creditor nations to forgive $13 billion in Iraqi debt, a senior Iraqi official said.
The field, West Qurna, has estimated reserves of 11 billion barrels, the equivalent of the worldwide proven oil reserves of Exxon Mobil, America’s largest oil company. Hussain al-Shahristani, the Iraqi oil minister, said in an interview that the field would be opened to new bidders, perhaps as early as next year.
The contract, which had been signed and later canceled by the Saddam Hussein government, had been in legal limbo since the American invasion. But the Kremlin remained hopeful it could be salvaged until this September, when Mr. Shahristani traveled to Moscow to inform officials there that the decision to cancel it was final, he said.
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The contract presented a quandary for the United States, which has been accused by some critics of invading Iraq for its oil. There is little evidence to date that the war effort has given American oil companies an inside track to Iraq’s reserves, and the Lukoil deal is the only one involving a major oil company to be reversed since the start of the war.
But as a cornerstone of its foreign policy, the United States has argued vigorously for countries to honor petroleum contracts. In that light, condoning the cancellation of the Lukoil contract could be seen in some quarters as evidence of a double standard.
“From the Russian government perspective, Iraq is seen as occupied and its administration directed by Washington, particularly when it comes to oil,” Vladimir I. Tikhomirov, chief economist at the Russian bank UralSib, said in a telephone interview.
“The Russians see the cancellation of their contract in Iraq as part of the U.S. drive to keep control over the major oil fields there,” he said.
This does not bode well, I highly believe Putin will not merely sit by while we move in on their sphere of influence. Bush is playing with fire and of course, it will not be him that suffers and consequences from his actions but the citizens.
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