Russia Agrees to Slash Iraqi Debt, Eyes Contracts

Sergei Blagov | Correspondent | Tuesday, December 23, 2003

Russia Agrees to Slash Iraqi Debt, Eyes Contracts

Moscow (CNSNews.com) - Russia has offered to write off more than a half of the $8 billion it is owed by Iraq, but in return it envisages a multi-billion investment in rebuilding the country.

Russian companies' investments in Iraq could reach $4 billion soon according to preliminary estimates, President Vladimir Putin said Monday in televised remarks during a meeting with Abdul Aziz al-Hakim, who holds the rotating chairmanship of Iraq's governing council.

Al-Hakim told journalists that Iraq would be open for Russian firms.

After a meeting with Putin on Monday, another governing council member, Jalal Talabani, said Russia had pledged to reduce Iraq's debt from some $8 billion to $3.5 billion.

Talabani added that Russia may consider scrapping the debt altogether if it received "beneficial treatment" in the area of oil contracts.

Moscow earlier said it had no intention of writing off the debt, after learning that it -- along with other countries that opposed the U.S.-led war -- was unable to participate in the U.S.-funded reconstruction projects.

But after a meeting last week with President Bush's special envoy on Iraq, former Secretary of State James Baker, Putin expressed conditional readiness to ease the debt burden.

In exchange for the debt reduction offer, Russia expects to benefit from the rebuilding efforts.

Russia's trade and economic development ministry is now drafting a list of Russian firms that could bid for reconstruction contracts, Minister German Gref said Monday.

Russia has been keen to develop the West Qurna oilfields containing some of the largest deposits in the world. Iraq signed a 23-year, multi-billion deal to develop the field in 1997 with a consortium led by Lukoil, which insists that the contract is still valid.

Lukoil president Vagit Alekperov was quoted as saying al-Hakim's visit to Moscow was being seen as a step towards revival of the West Qurna contract.

A senior company official will travel to Iraq next Monday for talks with the oil ministry, Alekperov said Monday.

Iraq has the world's second-largest oil reserves, after Saudi Arabia.

Meanwhile, the White House has announced that Baker will be visiting key countries in Asia to discuss the question of Iraq's $200-plus billion debt.

Baker will hold talks with leaders in China, Japan and South Korea early next week, spokesman Scott McClellan said Monday.

Apart from the Russians, Baker has secured pledges on reducing Iraq's debt from several other countries which fell on either side of the dispute over whether the U.S. to go to war to overthrow Saddam Hussein - allies Britain and Italy, and war opponents Germany and France.

Iraq owes around $120 billion to foreign creditors, plus another $100 billion in war reparations to countries including Kuwait and Saudi Arabia.

One-third ($41 billion) of the foreign debt is owed to the 19 mostly Western members of the Paris Club of lending nations.

Japan is Iraq's biggest Paris Club creditor, owed $4.2 billion.

(CNSNews Pacific Rim Bureau Chief Patrick Goodenough contributed to this report.)

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