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News, 1-8/11/02 (5) INTERNATIONAL BUSINESS PAGE * Stopped ship had rocket fuel for Iraq * Complaint Filed at U.N. Details Deal Set Up by Saddam's Son to Skim Profits from 'Oil for Food' Contracts; Russian Businessman Says He Sent $60,000 to Bank Account in Jordan as Part of the Deal * Iraq pins hopes on free-trade agreements with Arabs * Oil looks more and more to be at heart of American drive to topple Saddam * U.S. Unhappy With Ukraine on Iraq * Russia's Tatneft signs Basrah oil drilling deal with Iraq * Losing the Iraq war INTERNATIONAL BUSINESS PAGE http://www.accessatlanta.com/ajc/epaper/editions/friday/news_d32c82de04f3106 700a2.html * STOPPED SHIP HAD ROCKET FUEL FOR IRAQ by Daniel Williams and Nicholas Wood Atlanta Journal-Constitution, from Washington Post, 1st November Belgrade, Yugoslavia --- A ship carrying 14 containers of chemical pellets sat in the Yugoslav military port of Tivat in October, preparing for a voyage. U.S. officials believed the cargo was solid rocket fuel bound for Iraq, in violation of a U.N. ban on arms deliveries. Rather than tell the government of Yugoslavia, which receives $135 million in annual aid from Washington, U.S. officials asked neighboring Croatia to intercept the ship, the Boka Star, at sea. The Croatians seized the vessel Saturday in the Adriatic Sea. Croatian and U.S. officials say they have determined that the cargo was in fact solid rocket fuel. It was labeled "active charcoal." The incident was one of a series of recent discoveries of suspected weapons-related products and technology illegally bound for Iraq. The revelations make clear Iraqi President Saddam Hussein's continuing ability to evade U.N. restrictions and import military goods and expertise, even from a country such as Yugoslavia that is nominally friendly to Washington. Yugoslavia on Thursday formally acknowledged illegal military sales to Iraq. "These violations concerned the repair and return of Iraqi jet engines for MiG-21 and MiG-23 fighter jets and providing certain services in military-technical cooperation," a government statement said. That admission appeared to refer to claims that U.S. officials made this month after NATO peacekeepers in Bosnia raided a state-owned military firm named Orao. Documents seized there indicated that Orao and Yugoimport, a Yugoslav government-run arms trading company, have been helping Iraq refurbish its antiquated air force. Iraq has used Yugoslav technicians to upgrade its aircraft. The United States also suspects that technology Yugoslavia sold to Libya ultimately was destined for Iraq and intended to provide the basis for converting trainer jets into guided cruise missiles. Such weapons could avoid U.S. anti-missile systems and reach American allies in the Persian Gulf region and Israel. The news is potentially bad for Yugoslavia's efforts to improve its economy and foster closer relations with Western countries. It comes as the U.S. Congress is considering a measure to normalize Yugoslavia's trade relations with the United States, and when the United States is promoting Yugoslavia for membership in the Partnership for Peace program of the NATO alliance. The fact that the Boka Star passed through Tivat, a military port, indicated that the transactions weren't merely private deals but linked with the Yugoslav government and army. The army is the country's most prestigious institution, according to polls, and its commander in chief, President Vojislav Kostunica, is the country's most popular politician. Kostunica has distanced himself from the Iraq traffic, saying he knew nothing, and in any case, the transfers were of low-technology varieties and not ''state-of-the-art'' sales. Nonetheless, he's fired six civilian and military officials linked with Yugoimport, including an assistant defense minister, the air force chief and Yugoimport head Jovan Cekovic. U.S. and Yugoslav officials say the arms trade with Iraq dates from the 1945-80 rule of Marshal Josip Broz, the Communist leader known by his nom de guerre, Tito. The commerce continued through the tumultuous rule of Slobodan Milosevic during the 1990s. The Milosevic era ended with a street uprising two years ago, but Milosevic holdovers still populate the military establishment in Serbia, the larger of Yugoslavia's two remaining republics. The trade has persisted during President Bush's campaign for ''regime change'' in Iraq. ''There has not been a revolution here, but an evolution,'' said a senior U.S. official. ''And many things have changed hardly at all.'' The official said that the Bush administration has had inklings of the trade for two years and passed them on to the Belgrade government with concern, Western officials said. But lacking conclusive evidence, Washington stopped short of making economic aid to Belgrade conditional on stopping the traffic. In a protest note delivered to the Yugoslav government last week, the United States complained about missile technology transfers to ''Libya and probably Iraq.'' Specifically, the Americans said that Yugoslav firms were helping Libya develop 900-mile-range cruise missiles that could carry thousand-pound payloads. One of the companies allegedly helping Libya also ''possibly supplied missile-related assistance to Iraq'' and sent representatives to Baghdad to deal with an Iraqi purchaser of missile technology. The U.S. protest note named one University of Belgrade professor, Djordje Blagojevic, as having helped Iraq develop the Scud missile and Libya perfect missile guidance systems. In remarks to newspapers, Blagojevic said that he ''teaches missiles and aerodynamics'' but that the charges against him are false. ''Only studies are in question here,'' he told the Blic newspaper. Blagojevic said he taught in Baghdad for a month last spring. Another professor at the university said in an interview that experts there are working on the 900-mile-range cruise missile, but that it is only at ''the concept stage.'' They have also developed models of smaller rockets for attacking tanks and ships, and have simplified a French design for a jet engine, said the professor, who requested anonymity. The motive for cooperation with Iraq is largely financial, said the professor. Teachers at the university earn the equivalent of $250 a month. Contracts for helping the Iraqis run in the millions of dollars. The University of Belgrade also trains foreign students; tuition from these students amounts to about 20 percent of the university budget, the professor said. Currently 30 Libyan students are enrolled, but no Iraqis. Among subjects the visitors study are aerodynamic theory and design, use of computers in rocket and aircraft design, and propulsion and flight mechanics. The United States made its first public complaint about arms traffic after an Oct. 11 raid by NATO peacekeepers on the Orao aviation factory in Bosnia. Orao is located in the Serb sector of Bosnia, which maintains close links with neighboring Serbia. The company dates to the days when Yugoslavia was a state comprising six republics and military production was spread among them. Among the finds at Orao was a September letter written by a Yugoimport official in Baghdad notifying the Iraqis of a delay in the arrival of military equipment and jet engine parts. Syria caused the delay by withholding permission to transship the goods from Tartus, a port on the Mediterranean, across land to Iraq, a Western official said. The English-language letter advised the Iraqis how to prepare for the arrival of U.N. arms inspectors by hiding equipment and disguising its place of origin. They should remove all Orao labels, manuals, documents and catalogues from the work site in Baghdad and put them ''in a safe place,'' the letter said. ''When the possibility of their being discovered passes, the Yugoslav side will reassemble and operate them (the equipment) again,'' the letter promised. The writer also advised the transfer of Yugoslav experts from their residence in Baghdad, a place ''where a number of foreign experts from a number of countries are housed.'' A contract discovered at Orao detailed an $8.5 million deal between the Al-Bashair Trade Co. in Baghdad and Yugoimport to overhaul Iraqi military jet engines. The contract includes provisions for the care and housing of Yugoslav specialists, payment schedules and mutual pledges of ''business secrecy.'' The Washington Post obtained copies of the letter and contract. The Boka Star seizure presents a murkier case, Western diplomats said. Croatian inspectors found no documents pinpointing the delivery address or point of origin. The ship, however, had been used to ferry goods to Iraq via Syria before, a Western official said. Originally, U.S. intelligence officials believed that jet parts were on board, but no such parts have been found. http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/11 03-2002/0001833510&EDATE= * COMPLAINT FILED AT U.N. DETAILS DEAL SET UP BY SADDAM'S SON TO SKIM PROFITS FROM 'OIL FOR FOOD' CONTRACTS; RUSSIAN BUSINESSMAN SAYS HE SENT $60,000 TO BANK ACCOUNT IN JORDAN AS PART OF THE DEAL Newsweek (I think), 3rd November NEW YORK, Nov. 3 /PRNewswire/ -- A complaint filed with the United Nations details how Iraqi dictator Saddam Hussein's regime set up kickback deals on barrels of oil that he sold and bypassed the strict sanctions imposed on his regime after the gulf war. Gazi Luguev, the Russian middleman who filed the complaint with the U.N., tells Newsweek in the current issue that he sent $60,000 to a secret bank account in Jordan to nail down the crooked oil deal, which he said was arranged for him by Saddam's oldest son Uday. For years it had been an open secret that Saddam was plundering the Oil for Food program -- netting a huge cash windfall that the CIA believes the Iraqi dictator has used to finance his weapons programs. Last month, Luguev filed a complaint with the U.N. and detailed his under-the-table dealings with Iraq. In the official complaint, obtained by Newsweek, Luguev's allegations provide, for the first time, hard evidence of how Saddam has cleverly used the world's weakness for oil -- and oil profits -- to bypass the strict sanctions imposed on his regime after the gulf war to make himself stronger, reports Investigative Correspondent Mark Hosenball in the November 11 issue of Newsweek (on newsstands Monday, November 4). Luguev set up the deal with Uday Hussein last year when they met in Baghdad. Uday explained to Luguev how the Iraqi government would set him up with contracts to buy tankerloads of Iraqi oil at below-market prices. Luguev could then turn around and sell them to major oil companies at a higher price, and pocket the profit. Best of all, the deals were entirely legal under the Oil for Food program, a U.N. relief effort that allows Iraq to sell oil to purchase food and medical supplies. The money Luguev paid to Iraq for the oil would be deposited in a U.N.-controlled bank account, and used to feed starving Iraqi kids. "We need to help the children," Luguev recalls Uday's saying with a smirk. There was just one catch. Uday and his dad wanted a cut of the profits, Hosenball reports. In exchange for arranging the oil shipment, Iraqi officials later told him, Luguev would have to secretly wire $60,000 into a numbered account in Jordan. Luguev was informed that everyone who bought oil from Iraq paid a similar "deposit" on each oil contract. "It is our rule," he says an Iraqi official told him. Luguev says he wired the money and waited to hear back. The call never came. At first, Luguev says, Iraqi officials told him that his oil shipment was delayed. When he complained, they canceled the contract entirely-but kept his $60,000. Luguev was furious. "They think they are like God," he says. "That they can do what they like." In retaliation, Luguev did something remarkable: he squealed on Iraq -- and, in effect, on himself. (In response to Luguev's complaint, Iraq has said Luguev is "incorrect" -- but offered to return his money.) http://www.dailystar.com.lb/06_11_02/art28.asp * IRAQ PINS HOPES ON FREE-TRADE AGREEMENTS WITH ARABS Daily Star, Lebanon, 6th November The threat of war may be looming over Iraq, but Baghdad is forging ahead with its drive to ink additional free-trade agreements with Arab countries in a hopeful bid to rebuild imports up to the $23 billion annual level which existed prior to the 1991 Gulf War. "We are currently talking to the Moroccans and Saudis concerning a number of free-trade understandings," Iraqi Trade Minister Mehdi Saleh said on Monday. Saleh has thus far secured 10 such agreements with Arab countries. "We are holding discussions with Jordan too," Saleh added. The free-trade agreements provide zero tariffs on all products imported to Iraq, including agricultural goods, as well as governing trade with the Iraqi private sector. The free-trade route is crucial in that it provides an escape mechanism from the UN-brokered oil-for-food program, which permits the UN to veto any contracts with the government of President Saddam Hussein if it suspects they might involve goods with a potential military use. According to officials in Baghdad, the UN program has provided the country with a total of $23 billion worth of imported goods since 1996, equivalent to the value of imports in just one year prior to the implementation of sanctions. More recently, the UN program dented Iraq's finances through the so-called "retroactive" oil policy introduced in October of last year. The set of new pricing standards, introduced by the United States and Britain, allows the UN sanctions committee to assign Iraq's oil price only after shipping. This policy, according to UN officials overseeing the oil-forfood program, has downed Iraqi exports by 25 percent this year and eradicated potential revenue from sales by scaring away oil firms. "We are currently suffering from a $3 billion deficit that will last for the next six months,compared to a $10 billion surplus about two years ago, due to the UN oil-pricing policy," said Saleh. The deficit in Iraq's finances is frustrating a number of countries dealing with the Gulf nation. The deficit means that whatever contracts receive UN approval will not have the funds allocated to them at the time when the contract is won. The situation creates uncertainty for traders, whose goods may appreciate or depreciate during the intervening period. "It is a situation that drives you to the brink of tears," said one Lebanese industrialist. "Our goods stand to lose value while waiting for UN approval." This unhappy scenario with the UN oil-pricing policy was brought about when Iraq imposed a surcharge, according to some Western countries. The US and Britain say the Iraqi government imposed the surcharge on oil sales in order to skirt UN rules and benefit from fluctuations in the price of oil. However, Iraqi officials have never acknowledged the existence of a surcharge. "Even if there was one, it would be legal because we need to cover expenses for extracting oil, which reach up to 30 percent of our import bill," said Saleh. Iraq has now opened up to friends and foes alike in a bid to cater to its hungry market of 22 million people. Oil protocols with Arab countries are one escape route, involving the direct sale of oil to a country at a discount in return for goods. "Jordan has not been affected by the UN oil-pricing policy because we have signed an oil protocol with the Jordanian government," said Saleh. But a country like Lebanon, without an oil protocol, is not getting the funds it should and some industrialists are resorting to the Syrian oil protocol to win contracts. Iraq and Iran are currently conducting talks to scrap or reduce transit fees on Iranian goods passing through Iraq and on into Syria and Lebanon. On Thursday, Iraq reopened its border with Saudi Arabia for the first time in 12 years. But while the Saudi-Iraqi border is not yet open for commercial traffic, the Saudis are hopeful it will become an international gateway in a few weeks' time once UN inspectors are posted at the border point. Syria, Egypt, UAE and Lebanon are the top four Arab suppliers of goods to the Iraqi market so far this year. "Currently, 50 percent of our imports come from Arab countries," said Saleh. Russia remains the No. 1 supplier to the Iraqi market,but Iraq is counting on a new investment law due out early next year to facilitate Arab joint ventures in Iraq. "This law will encourage Arab investors to come to Iraq because it grants them the same rights provided to Iraqis," said Saleh. AFP/Ahmed al-Rubaye. http://www.dailystar.com.lb/06_11_02/art24.asp * OIL LOOKS MORE AND MORE TO BE AT HEART OF AMERICAN DRIVE TO TOPPLE SADDAM by Ed Blanche Daily Star, Lebanon, 6th November Early next month, US State Department officials are scheduled to meet Iraqi opposition leaders, recent defectors from Iraq's oil industry and experts from the US Department of Energy to discuss exploiting Iraq's vast oil and gas reserves once US forces have "liberated" the country.This has reinforced the increasingly popular belief that the Bush administration's real objective in getting rid of Saddam Hussein is to gain control of Iraq's oil wealth, marginalize Saudi Arabia and cripple the Organization of Petroleum Exporting Countries' ability to influence prices. US oil sources say that the working group will not only prepare recommendations for rehabilitating Iraq's oil industry following Saddam's ouster, but also address such issues as its membership of OPEC, whether it should be allowed to produce as much as it is able, ignoring its OPEC quota, and whether contracts made by Saddam's regime with Russian, French and other non-US oil companies should be honored by a new government. Ahmed Chalabi, chairman of the Iraqi National Congress (INC), one of the main opposition groups,envisions boosting Iraqi output to 5 million barrels per day (bpd) as soon as possible, up from the 2 million bpd level of the last decade because of sanctions and the serious deterioration of infrastructure.After 12 years of enforced production limits,Iraq is unlikely to pay much heed to calls for restraint from OPEC, already nervous at losing its share of the market to rivals outside the cartel, especially Russia. The White House has also said it has no plans to control Iraq's oil reserves. "That's not the way America works," Bush spokesman Ari Fleischer said on Oct. 30. Whether that's true remains to be seen. But the prospect of grabbing those reserves of 116 billion barrels the secondlargest after Saudi Arabia and largely untapped is galvanizing Big Oil in the US and Europe and has become a weighty bargaining chip for the administration in its efforts to swing key members of the UN Security Council behind Bush's demand for military action to eliminate Saddam and the weapons of mass destruction he possesses or is seeking to acquire. The Bush administration has been accused of incompetence in presenting its case for attacking Iraq and hiding behind blatant falsehoods, and while few would argue that the Iraqi people would be better off without Saddam, there would seem to be a credible argument that the Bush administration is out to get its hands on Iraq's oil and to reshape the Middle East and its energy reserves. The notion that US policy is driven by commercial interests, and the conspiracy theorists are convinced it is, is not borne out by the long-standing unilateral US sanctions on Iran and Libya, two major producers where US oilmen once ruled the roost.Given US invective against these two states, those sanctions are likely to remain. Yet energy security is a major objective of the Bush administration and despite its post-Sept. 11 animosity toward Saudi Arabia and Bush's efforts to open up alternative sources of supply in the Caspian,West Africa and elsewhere, the US realizes that it is going to have to depend on Saudi Arabia and the Gulf, which currently supply about 25 percent of US oil imports,for years to come.Bush may also be reluctant to jeopardize efforts to cultivate Russia as a major future source of oil. Gaining control over Iraq's oil wealth also has a down side. Boosting Iraqi production outside OPEC would drive down prices, which would not make US oil companies happy, and would likely antagonize not only the Iraqis, but other Arab states,destabilizing a region that is increasingly anti-American. Still,even if US intentions regarding Iraq are as high-minded as the Bushites make out, a successful invasion of Iraq would put them in the driver's seat with the post-Saddam oil industry providing Saddam doesn't blow it up as his regime topples. For that reason, Russian, British and French oil majors have already begun negotiations with the Iraqi opposition groups, including the INC and the Patriotic Union of Kurdistan, one of the two main Kurdish factions,to ensure that they get a share in the spoils. Sharif Ali bin al-Hussein, another INC leader who, as a cousin of the late King Faisal II of Iraq who was overthrown and killed in 1958, considers himself heir to the Hashemite throne has bolstered the perception that Bush's goal is to get his hands on Iraq's oil wealth. On Oct. 16, as Bush was calling for immediate and decisive action against Iraq, Sharif Ali was saying the Iraqi oil sector would be opened up to all comers, including the Americans; that all existing contracts would be reviewed to determine if they were in Iraq's interests including those with Russia's Lukoil and France's TotalFinaElf to develop oil fields. Chalabi was more direct, saying he favored the creation of a US-led consortium to develop Iraq's oil fields, which have deteriorated badly under UN sanctions: "American companies will have a big shot at Iraqi oil," he said. That is not good news for the non-American oil giants. Russia and France, of course, are permanent members of the Security Council with veto powers and have opposed Bush's determination to use military force against Saddam. So it is not beyond the bounds of possibility that these two,owed billions of dollars by Saddam, largely for arms, will eventually go along with Bush in return for lucrative oil concessions. Chalabi, who has CIA backing, has advised Moscow that if it wants to protect its extensive oil interests in Iraq it should turn its back on Saddam. "People in Iraq will be more amenable if Russia does not obstruct the liberation of Iraq," he declared. Russia has a lot to lose if it continues to block Bush's plans. Lukoil, Russia's biggest oil company, signed a $20 billion contract in 1997 to develop the West Qurna field,estimated to hold up to 7.3 billion barrels of recoverable oil reserves, near Iraq's border with Iran. The Russian government has a 14 percent stake in Lukoil and would not like to see that deal disappear. More recently,another Russian oil company, Zarubezhneft, was awarded a $90 billion concession to develop the Bin Umar field. In October 2001, the Russian oil services company Slavneft reportedly signed a $52 million contract to drill in the Tuba field in southern Iraq. A proposed $40 billion economic agreement between Moscow and Baghdad also includes prospects for the Russians to drill in Iraq's western desert. All told, Saddam has in recent years signed contracts with non- US companies worth $1.1 trillion as part of his campaign to undermine UN sanctions. These contracts, of course, can be activated only when sanctions are removed, but the companies, as well as Vladimir Putin's government, are determined not to lose them. The Russians believe that the Bush administration has made its support for the Iraqi opposition conditional on all oil contracts signed by Saddam's regime being declared null and void by any successor government in Baghdad. Lukoil says it has received no guarantees that its interests in Iraq will be safe under a new government. It thus may not be too farfetched to deduce that the growing willingness of Paris and Moscow to compromise on Bush's efforts to push a resolution authorizing a US attack on Iraq through the Security Council has something to do what how the spoils are to be divided up once Saddam has been removed. "To get Russia's support, or at least its silent agreement, the United States has to assure that Russian oil interests will be considered once the regime change has occurred," one oil industry analyst said. A few days ago, William Safire, the hawkish New York Times columnist, wrote a commentary that was breathtaking in its vision of a crusading America riding forth to save an ungrateful world from itself. In it, he said that Moscow and others who have sought to cripple Bush's plans should be cut out of any stake in a post-Saddam Iraq. Safire wrote that "the Paris- Moscow-Beijing axis of greed whose commerce-driven politicians seek to prop up the doomed Saddam in the United Nations will find its policy highly unprofitable." The French fear they will suffer from US oil ambitions once Saddam is out of the way and thus will almost certainly go along with Bush when it comes to the crunch. State-run Total- FinaElf, which has had its eye on the vast Majnoon oil field in southeastern Iraq for some time, has already begun negotiations with Washington about who will get what after the war. Even the British, Bush's staunchest ally, are worried. Last week, Lord Browne, the chief executive of British Petroleum and one of Tony Blair's favorite industrialists, voiced concern that European companies were going to be shut out of Iraq. BP, Britain's biggest company, has lobbied the Bush administration and Blair's Labor government to ensure that everyone will get a slice of the pie. "We have let it be known," Browne said in London, "that the thing we would like to make sure, if Iraq changes regime, is that there should be a level playing field for the selection of oil companies to go in there if they're needed to do the work there." The Guardian newspaper noted that Blair's administration will "listen carefully" to Browne,whose company's links with the government are so close it was once nicknamed Blair Petroleum. Just as Bush's administration is top-heavy with former oil company executives like himself, Blair's team these days includes a number of high-flyers recruited from BP. There are other complications. Turkey, a key US ally whose territory is vital for waging a military campaign in northern Iraq, has its eyes on reclaiming that region which the British and French sliced away from the Ottoman Empire in 1922 and which contains the oil fields around Kirkuk and Mosul.That could be the price of Ankara's acquiescence. In the run-up to Monday's parliamentary elections in Turkey, Premier Bulent Ecevit, who ordered the invasion of Cyprus in 1974, and army generals threatened to seize Iraq's northern oil fields to prevent their falling into the hands of Kurdish rebels like the Patriotic Union of Kurdistan. "If Turkey's powerful army on Iraq's border significantly shortens the war, its long-time claim to royalties from the Kirkuk oil fields would at last be honored," Safire wrote. "This would recompense the Turks for the decade of economic distress caused by the Gulf wars, and be an incentive for them to patch up relations with pro-democracy Iraqi Kurds fighting Saddam at their side." That scenario will not enthrall the Kurds, who see the oil fields in northern Iraq as the economic cornerstone of an autonomous state. Last month, Hamid Efendi, a Kurdish military commander, said his forces would seek to capture the Kirkuk and Mosul oil fields which are outside the Kurdish enclave currently protected by the US and Britain if the Americans go in. This poses a problem for Washington, which needs both Turkey, which fiercely opposes the emergence of a Kurdish state, and the Iraqi Kurds in their campaign against Saddam and it will be interesting to see how they try to keep both sides happy. http://cgi.wn.com/?action=display&article=16616336&template=baghdad/indexsea rch.txt&index=recent * U.S. UNHAPPY WITH UKRAINE ON IRAQ Associated Press, 6th November WASHINGTON (AP) ‹ U.S. and British investigators could not get an explanation from Ukrainian officials about the reported approval by Ukraine President Leonid Kuchma of the transfer of a radar system to Iraq, the State Department said Wednesday. Spokesman Richard Boucher expressed disappointment with the level of cooperation that Ukrainian officials provided the U.S.-British team that visited the country last month. Any transfer of a radar system to Iraq would violate U.N. sanctions against Iraq. Ukrainian officials have denied any sale was made, and Kuchma has denied approving one. As evidence of Kuchma's role, the State Department said it verified the authenticity of a two-year-old recording in which Kuchma allegedly is heard approving the $100 million sale. Boucher said the fact-finding team concluded that Ukraine's export control process lacks sufficient safeguards to prevent senior officials or entities from misusing state organs and-or bypassing export controls. "They failed to provide our U.S.-U.K. team with satisfactory evidence that the transfer to Iraq did or could not have taken place. So the question is still open," Boucher said. He rejected a Ukrainian proposal for a U.N. Security Council investigation into the alleged sale. "If the Ukrainian government had wanted to clarify matters fully they could have done so with the U.S. and the U.K. team," Boucher said. http://www.petroleumworld.com/story9715.htm * RUSSIA'S TATNEFT SIGNS BASRAH OIL DRILLING DEAL WITH IRAQ by Selina Williams Petroleumworld, 7th November Dow Jones Newswires: Russia's OAO Tatneft (TNT) has signed a contract with Iraq's Oil Ministry to drill for oil, the Organization of Petroleum Exporting Countries' official news agency, Opecna, quoted the weekly Al-Zawraa newspaper as saying Thursday. Under the deal, Tatneft would drill 15 wells for Iraq's state-owned South Oil Company in the southern region of Basrah, the paper said. A team of engineers and technicians from the Russian firm has already arrived in Iraq to carry out research and exploration works for the Basrah oil field. The paper didn't say if work would start immediately, or after U.N. economic sanctions imposed on Iraq since 1990 were lifted. The sanctions prevent Iraq from investing in the oil sector. Two years ago, Tatneft won a contract to drill 45 wells in the oil-rich region of Kirkuk in northern Iraq. That deal was approved by the U.N. Tatneft isn't the only Russian company with business projects in Iraq, a traditional partner of the Soviet and then subsequently the Russian oil industry. Russian oil giant Lukoil (R.LKO), Zarubezhneft and Rosneft (R.RNF) also have contracts to provide drilling services in Iraq. http://quotes.freerealtime.com/dl/frt/N?art=C2002110800312w3871&SA=Latest%20 News * LOSING THE IRAQ WAR by Sam Vaknin SKOPJE, Macedonia, Nov 08, 2002 (United Press International via COMTEX): The Security Council Friday approved a tough resolution calling upon Iraq to disarm or face military action. The decade-old sanctions regime has provided countries such as Ukraine, Belarus and the Serb part of Bosnia-Herzegovina with lucrative commercial opportunities. According to international and Israeli media, they all illicitly sold arms and material -- from active carbon filters to uranium -- to Iraq's thuggish rulers, though Ukraine still denies it vehemently. The impending war and the lifting of sanctions likely to follow will grind these activities to a halt. This would not be the first time the countries of Central and Eastern Europe -- from the Balkans to the steppes of Central Asia -- bear the costs of Western policies against Iraq. In the wake of the Gulf War, Iraq defaulted on its debts to all and sundry. The members of COMECON, the now-defunct communist trade bloc, were hit hardest. According to Mikhail Margelov, chairman of the International Affairs Committee of Russia's Federation Council (upper house), Iraq still owes Russia alone about $7 billion to $12 billion in pre-1990 principal, mainly for arms purchases. Macedonian construction groups were active in Iraq between 1950-90. They are owed tens of millions of dollars -- the equivalent of 5 percent of gross domestic product, say sources in the government. Yugoslav, Czech, Polish and formerly East German firms are in the same predicament. A typical case: the Belarus news agency, Belapan, reported recently how Leonid Kozik, leader of the Federation of Trade Unions of Belarus, co-chairman of the Belarusian-Iraqi Joint Commission on Trade and Economic Cooperation and a close aide to Belarusian President Aleksander Lukashenka, traveled to Iraq in an effort to recoup millions of dollars owed to the Belarusian metals and energy concern Belmetalenerga. The unfortunate company -- the country's exclusive export channel to Iraq -- sold to it a range of goods, including 500 tractors worth more than $5 million in 1999. The chances of recovering these debts diminish by the day. East-West Debt, an international financial company specializing in purchasing and recovery of overdue trade or bank debt in high-risk countries, published this advisory recently: "Many enterprises, banks and insurance companies are still holding uninsured trade debts on Iraq, due to exports or loans originating from before 1990. Please be aware that these claims on Iraq may become time-barred." Russia reasonably claims to have sustained $30 billion in lost business with Iraq since 1991. Even now, dilapidated as it is, Iraq is a large trade partner. According to the United Nations, bilateral trade under the oil-for-food program since 1996 amounted to $4.3 billion. The real figure is higher. Russia's oil industry is private and keeps much of its revenues off the books. Tens of thousands of Russians used to purchase Iraqi goods in Turkey and sell them back home -- a practice known as the "shuttle trade." Russia and Iraq confirmed in August they are negotiating $40 billion to $60 billion worth of cooperation agreements in the oil, agriculture, chemical product, pharmaceutical, fertilizer, irrigation, transportation, railroad and energy sectors. According to The Washington Post, some of the 67 10-year accords relate to oil exploration in Iraq's western desert. An Iraqi delegation, headed by the minister of military industry, visited Belarus last month in an effort to conclude a similar economic package. But such contracts are unlikely to materialize as long as the sanctions remain intact. Radio Free Europe/Radio Liberty reports that Russian firms already control two-fifths of sales of Iraqi oil in world markets. Even American companies use Russian fronts to trade with the embargoed country, claim sources in the energy sector. The Financial Times exposed two years ago similar arrangements between U.S.-based suppliers, oil and service companies and West European entities. According to The New York Times, a Russian consortium, led by Lukoil, signed a 23-year, $3.5 billion agreement with Baghdad to rehabilitate some of its crumbling oil fields. According to the British Broadcasting Corp., Lukoil also inked unusually favorable production-sharing agreements with the desperate Iraqi government. Whether these $20 billion concessions will be honored by Baghdad's post-war new rulers is questionable. Even the current regime is incensed that Lukoil hasn't started implementing the contracts due to U.N. sanctions. According to Asia Times, the Iraqi government has recently excluded the Russian firm from its list of accredited suppliers under the oil-for-food program. A Russian state-owned oil company, Zarubezhneft, is said by the London Observer to have signed a $90 billion contract to develop the bin-Umar oilfield. It subcontracted some drilling rights in the West Qurna fields to Tatneft, another Russian outfit. The Washington Post reported a $52 million service contract signed last October between Slavneft and the Iraqi authorities. The International Energy Agency's World Energy Outlook 2001 claims the Iraqis have awarded foreign oil contracts worth a staggering $1.1 trillion, much of it to Russian, French, and Chinese firms. Russia is well placed to enjoy Iraq's graces while Saddam Hussein is in power. It is scrambling to secure similar access in an American-sponsored post-conflict reign, according to the Observer, hence much of the haggling in the United Nations over language and America's freedom of action. Even more crucially, Russia's aspirations to replace Saudi Arabia as the world's largest and swing oil producer and to become America's primary source of oil may be dashed by U.S. control of Iraq's enormous proven reserves. The rising tensions in the Gulf may be providing Russia and its extractive behemoths with a serendipitous windfall -- but, in the long run, Russia's rising oil star is threatened by a permanent American stranglehold over Iraq's 112 billion barrels. A successful American campaign not only jeopardizes Russia's future interests, but its present income as well. A drop in oil prices -- more than likely as Iraq is pacified and its oil production surges -- will hurt Russia. Below a certain price for crude, Russia's domestic fields are not worth developing. Between the rock of contract-freezing sanctions and the hard place of American dominance, Russia was forced to vote in favor of the U.S.-sponsored resolution in the Security Council. It may signal a new period of cohabitation -- or, more likely, the beginning of a long tussle over commercial interests and economic benefits. _______________________________________________ Sent via the discussion list of the Campaign Against Sanctions on Iraq. To unsubscribe, visit http://lists.casi.org.uk/mailman/listinfo/casi-discuss To contact the list manager, email firstname.lastname@example.org All postings are archived on CASI's website: http://www.casi.org.uk