Russia's oil groups split on Iraq prospects
By Andrew Jack in Moscow, Financial Times, UK, April 22 2003
As diplomats in Washington and Moscow consider how to deal with the strained relations between their countries caused by the war in Iraq, Russian oil companies are increasingly divided in their hopes of gaining a share of business from Baghdad's future government.
Companies linked to the former Iraqi regime - or to the Russian authorities, which took a strong line against war - may risk losing out.
Nikolai Tokarev, head of the state-controlled group Zarubezhneft, which was active in trading and future oil production in Iraq under Saddam Hussein, said recently that he believed the US would take over all business in the country and he had all but written off the prospect of recovering the contracts his business had been undertaking.
His sentiments were supported by Richard Perle, adviser to Donald Rumsfeld, the US defence secretary, who predicted yesterday in an interview in the Russian newspaper Kommersant "a high probability that all previous deals with Russia will be declared meaningless".
Some other companies that worked with Mr Hussein's regime are also pessimistic about their prospects, with Yuri Shafranik, head of the Russia-Iraq Co-operation Committee, estimating that $2bn (€1.84bn, £1.28bn) in business had already been lost to Russian groups as a result of the war.
The situation is less clear-cut for Lukoil, Russia's second largest oil group and the most important existing company in Iraq. It signed a $4bn contract in 1997 for a majority share in the development of the West Qurna field, but froze work in line with UN sanctions.
Lukoil protested when the Iraqis cancelled the contract unilaterally late last year, after reports the company was discussing work under a post-Saddam regime. It maintains there were no legal grounds for the dismissal, but its conversations with the then opposition could also boost its chances today.
Lukoil is lobbying politically in Washington, while also threatening legal action to defend its interest against the former Iraqi government's decision and against any attempts by rivals to take over its role.
Yukos, Russia's largest oil group, has no interests in Iraq but Mikhail Khodorkovsky, its chief executive, has said that if the financial and political conditions are right, he would be interested in investing in the country. The group employs a number of US executives, and has staff with previous experience in Iraq.