Iraq keeps Russia, France in running for oil deals

Iraq's Governing Council will let Russian and French firms compete for oil sector development contracts despite opposition from pro-US members, a leading Iraqi politician said.

Hamid al-Bayati, a senior official with the main Shi'ite Islamic group Supreme Council for the Islamic Revolution in Iraq (SCIRI), said a Governing Council delegation led by his party has told Moscow and Paris not to fear exclusion from Iraq, although they did business with Saddam Hussein and opposed the US-led war that toppled him.

Mr Bayati said Iraq could also honour a $3.8 billion deal between Russian company Lukoil and former leader Saddam Hussein struck in 1997.

"We asked Paris and Moscow to be involved in the restoration of Iraqi sovereignty and reconstruction, including oil. We do not want them to be isolated from Iraq," Mr Bayati told Reuters.

The delegation, which met with Russian President Vladimir Putin, included SCIRI head Abdelaziz al-Hakim, who is keen along with some Islamist and Kurdish members of the Governing Council to strengthen relations with countries like France and Russia and become less dependent on Washington and its allies.

Patriotic Union of Kurdistan leader Jalal al-Talabani, who was supported by the Soviet Union and lately became an ally of the United States, was also with Mr Hakim.

They met with Lukoil, the major partner in a Russian-led consortium that signed a $3.8 billion deal with the former Baathist government to develop the West Qurna field in southern Iraq, whose production is projected at 600,000 barrels per day.

"Saddam cancelled the contract after Lukoil refused to bust the UN sanctions. Lukoil expressed interest in discussing the contract and we responded by inviting them to Baghdad and asking his excellency the oil minister to see whether the contract was legally binding," Mr Bayati said.

"We are also examining whether it was competitive and whether it could be amended to further Iraq's interests."

But oil ministry spokesman Assem Jihad said the contract was not discussed at a meeting earlier this week between a delegation from the company and Oil Minister Ibrahim Bahr al-Uloum.

The Pentagon announced last month that firms from countries that opposed the war would be barred from bidding for $18.6 billion of US-funded reconstruction contracts in Iraq, provoking widespread protests.

The oil ministry and a number of Governing Council members are privately opposed to honouring oil deals struck by Saddam and awarding France and Russia a slice of the post-war oil sector, politicians familiar with the situation said. Mr Bahr al-Uloum has said Baghdad will pursue long-term deals with international companies after power is transferred to a sovereign Iraqi government by July in a bid to lift production capacity by more than two million bpd to five million bpd by the end of the decade.

The Governing Council's position will raise the pressure on the oil ministry to include Russian and French firms in a conference to discuss oil investment models in the next few months. Oil ministry officials say no decision has been yet made to invite Russia and France.

Leading the opposition to normalising oil relations with France and Russia is Ahmad Chalabi, the best-connected Iraqi politician in Washington and the man who lobbied to pass a US law committing the United States to overthrow Saddam and help Iraq become a democracy.

Mr Chalabi says Russia and France helped Saddam stay in power and should not be rewarded.

But Mr Chalabi's allies acknowledge he does not have enough support in the Governing Council, especially after France and Russia earlier this month signalled their willingness to negotiate reducing billions of dollars of Iraqi debt.