Translated material
Trade for oil
West Qurna 2 is mired in Iraqi government debt
Iraqi Oil Minister Hussein al-Shahristani continues to assert that the Iraqi government does not consider LUKOIL's contract to develop the giant West Qurna 2 oil field to be valid. Over the weekend, The New York Times published his statement that the field may be open to new applicants as early as next year. However, earlier Iraqi officials have repeatedly said that they consider the LUKOIL contract to be invalid . During a visit to Moscow in August of this year, Mr. al-Shahristani asserted that LUKOIL would participate in all tenders on a general basis - in accordance with the new oil law. However, this law has not yet been adopted; the Iraqi parliament has not been able to reach consensus on it for more than a year. And Mr. al-Shahristani seems to express the position of only the developers of the bill, nothing more.According to the contract concluded between LUKOIL and the administration of Saddam Hussein, Vagit Alekperov’s company in the West Qurna-2 consortium, which is developing the field of the same name with reserves of 8-10 billion barrels of oil, owned 68.5%, Mashinoimport and Zarubezhneft - - 3.25% each and the Ministry of Oil of Iraq - 25%. However, in the last three months of Saddam Hussein's rule, his entourage accused LUKOIL of having connections with the Americans. According to them, they are terminating the contract under the pretext that its implementation has not begun (and it could not begin due to sanctions against Iraq - drilling equipment could not be imported). Then hostilities began, and the fate of West Qurna 2 was in limbo.
This year, at an unofficial level, both Russian and Iraqi officials began to say that they link the problem of LUKOIL’s rights to Iraqi oil with the write-off of Baghdad’s national debt to Moscow for $13 billion. As is known, Russia (like all members of the Paris Club) has pledged to write off 80% debt immediately and 20% in installments. And Deputy Finance Minister Sergei Storchak said a year ago that about 90% of the debt would be written off immediately, as a result of which only $1 billion would be restructured by 2027.
However, the matter has stalled due to the fact that documents to implement this obligation have not been developed.
During his visit to Moscow, the Minister of Oil, Mr. al-Shahristani, said, however, that he did not connect the two problems, and therefore was not favorable to the Russian company. He stated that LUKOIL had practically lost the contract for the field: “This contract was signed by the previous regime and canceled by it. And the records available at the Ministry of Petroleum indicate that this contract was terminated at one time, was interrupted due to the fact that it was not performed in accordance with the terms stipulated in it.” True, he clarified, the final decision on all subsoil development contracts will be made by a special council under the leadership of the country's prime minister. And he immediately hinted: LUKOIL, like other foreign companies, has no chance of gaining control in any of the fields that Iraq will develop together with foreign investors.
It should be noted that all of Mr. al-Shahristani’s arguments were based on the oil law that had not yet been adopted. The position of Iraqi Foreign Minister Hoshyar Zebari was also based on it. In September, in an interview with Vremya Novostey, he spoke even more categorically about the contract with LUKOIL: “The previous contracts have been cancelled. There are no obligations on our part.” However, he made it clear that Iraq, in cooperation with Russia, will “take into account” various aspects: for example, the fact that more than 20% of LUKOIL shares belong to the American company ConocoPhillips, as well as the problem of writing off the national debt. And he vaguely noted: “We will study the previously signed contracts to see which ones deserve attention.”
Thus, Russian-Iraqi relations are not developing now because neither side dares to take the first step: Moscow does not write off the debt, fearing that the situation may change and the contract with LUKOIL will be terminated (and the company will not receive anything worthwhile in return), and Baghdad is not saying it will continue this contract without guarantees that the debt will be forgiven. And with ministerial statements he is trying to provoke Russia to make the first step.
LUKOIL said yesterday that they had not received any notice of termination of the contract for the development of West Qurna-2. A company representative declined to comment on the situation in more detail. Previously, as is known, LUKOIL has repeatedly declared the legitimacy of the contract, since termination is possible only in the Geneva International Court (as written in the contract), and no one has applied there.