: Of course this was to coincide with the return of Russia to
: revised Soviet status, in order to balk the One world govt:
: perhaps Bush/others are trying to force Russia's hand--
: provoking them into acting prematurely and on their own
: initiativ, rather than under F2's direction?

Thursday April 26 10:55 AM ET
Russian Firms Jostle for Iraqi Oil; Problems Ahead

By Sujata Rao

MOSCOW (Reuters) - Russian oil companies are jostling to grab chunks of Iraq's huge oil reserves before the United Nations lifts sanctions on the Arab country and Western firms move in.

Russian oil firms, bolstered by Moscow's close ties with Baghdad, are keen to expand their supply base and tap into the second largest reserves in the world.

``Of course we are keen to expand our reserve base abroad and Iraq for us is a good option, not only in itself but also as a platform for the region as a whole,'' said Dmitry Dolgov, spokesman for LUKOIL, Russia's largest oil company.

LUKOIL was one of the first Russian firms to get involved in Iraq, agreeing in 1997 to invest $4 billion over 23 years into the huge West Qurna oilfield with total reserves of six billion tons. But work there has not progressed because of sanctions.

While some Western firms such as TotalFinaElf, with exclusive negotiating rights for the Majnoon and Bin Umar fields, are interested in Iraq, those projects too are frozen.

But last December Russian firm Zarubezhneft became the first company to win long-awaited U.N. approval to drill in Iraq to help Iraq maintain output under the U.N. oil-for-food program.

It got the go-ahead for an $8 million contract to drill 45 wells while another firm Tatneft this year received a $4.8 million deal to drill 33 wells. Slavneft said this week it would sign in May a deal to drill in the Suba field with reserves of up to 800 million barrels.

``We plan to boost our output to 20 million tonnes (400,000 bpd) by 2005 from 12 million tonnes today. A considerable part of this growth will come from our overseas fields including Iraq,'' said Slavneft spokeswoman Yekaterina Arkusha.

Media reports say Gazprom-affiliated Sibur and Stroitransgas are also getting into the act, while a slew of companies supply oil industry equipment.

The U.N. approval to Zarubezhneft already opened the door for other foreign firms to apply for similar ventures.

Making Hay While Sanctions Last

Russian companies are also the largest lifters of Iraqi crude under the oil-for-food program, accounting for about 40 million barrels so far this year, half of that lifted by Zarubezhneft.

The oil companies are also keen to obtain a toehold in Iraq as part of the quest to boost their presence abroad.

Slavneft earlier this week signed a deal to drill in Sudan and is eyeing two other projects there while LUKOIL is active in Egypt's Melut field together with Agip.

Alfa-Bank analyst Konstantin Reznikov said the Iraqi projects would allow Russian firms to produce more at less cost.

``For one, Iraq is closer to markets, second, it is cheaper to produce oil there than in Russia,'' Reznikov said.

``In Iraq, average production cost is about $2.5 per barrel while in Russia it costs $3.5-$4.0, not including high taxes and shipping costs.''

End Of Sanctions Could Bring Problems

Russia has opposed U.N. sanctions against Iraq, saying they harm its business interests and prevent it from recouping $8 billion of debts owed by Baghdad. But analysts say the end of sanctions could bring problems for Russian firms.

``Right now Russian companies are welcome in Iraq as no one else can go there. They are not up against U.S., British and French competitors,'' said Stephen O'Sullivan, energy analyst at United Financial Group. ``But once sanctions are over they will be one of 10 companies vying for a slice of the pie.''

But they say current easy access gives the Russians a chance to build contacts which could stand Russia in good stead post-sanctions or when ``smart sanctions'' which could promote other foreign oil work in Iraq, kick in.

``The sanctions are good for us,'' one Russian oil trader said. ``We can increase our influence and sign contracts for the most lucrative fields before Western firms flock there.''

But despite the head-start on Western rivals, the Russians could be spurned once Iraq has a choice.

Baghdad, irritated about Russia's reluctance to violate U.N. sanctions, has threatened to tear up LUKOIL's West Qurna deal saying there has been no sign of the promised investments.

And in another possible sign of Baghdad's annoyance, LUKOIL has not received contracts to lift Iraqi oil in recent phases.

But LUKOIL is treading carefully as it is keen not to jeopardize its chances in the U.S., where it owns a filling station network and plans a New York listing.

``However much Russia wants to develop its overseas oil business it still wants international respectability,'' O'Sullivan said.

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