Iraqi Oil, Russian Ambitions and Influence

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.

Iraq’s decision was apparently made based on advice received from American advisors.

Russian authorities have retaliated by threatening to revoke a 2004 deal with creditor nations to forgive $13 billion in Iraqi debt.

The field at issue is West Qurna; its estimated reserves are 11 billion barrels, the equivalent of the worldwide proven oil reserves of Exxon Mobil. 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 Saddam Hussein’s government, had been in legal limbo since the American invasion. But the Kremlin remained hopeful it could be salvaged until this September, when al-Shahristani traveled to Moscow to inform officials there that the decision to cancel it was final, he said.

The Russian government, newly emboldened in international affairs by its expanding oil wealth, is still backing Lukoil's claim and protesting what it considers selective enforcement of contracts in Iraq.

West Qurna has the potential to produce 1 million barrels of oil a day after four to five years of development, according to both Iraqi oil officials and Lukoil.

Russia Will Defend Its Oil

Russian President Vladimir Putin, responding to questions on a TV broadcast on October 18, 2007, continued his recent criticism of the United States.

Putin suggested that the U.S. military campaign in Iraq may have been attempt to seize its oil reserves. He said that resource rich countries such as Russia needed to have strong militaries to defend themselves against those who might try to steal their resources.

He also called for the U.S. to announce an exact date for the departure of troops from Iraq.

With respect to his own future, he said that Russia will have a different president next year. This would appear to lay to rest any notions that he would seek both a third term and constitutional crisis, but it was not clear what role he would play in Russia’s new government.