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. Last Updated: 07/27/2016

Russia's Oil Giants Plan Iraq 'Invasion'

With Iraq's gradual return to the international oil market expected soon, Russia's petroleum giants are lustily eyeing billions of dollars in investment projects in the Middle Eastern nation.

Although a lifting of United Nations sanctions is expected to drive world oil prices down, worrying some Western and Middle Eastern producers, a renewal of Iraqi exports provides more opportunities than problems for the stagnant Russian oil sector, oil companies and analysts said Thursday.

"Russian oil majors are anxiously waiting for the moment when they can rush into Iraq and start extracting oil," said Alexander Blokhin, a senior analyst with United Financial Group. "Provisional agreements between Russia and Iraq exist, and the technical research is under way."

Diplomats and analysts in Baghdad on Thursday said Iraq's talks with the UN on an oil-for-food formula were on the right track, but both sides need more time and effort to reach an agreement, Reuters reported. On the table is a proposal to allow the country to sell $1 billion worth of oil every three months with the revenues used as humanitarian aid to buy food and medical supplies.

Sanctions were imposed on Iraq after its invasion of Kuwait in August 1990.

LUKoil spokesman Pyotr Neyev said his company is involved in several projects in Iraq that will start "as soon as the embargo is lifted." Last year LUKoil secured a 70 percent stake in the Western Kurna oil field production-sharing consortium, a project worth $2 billion to $7 billion that may also include Western oil majors, he said.

"We have very strong ties with Iraq, and we are committed to work there," Neyev said.

A Russian Fuel and Energy Ministry official this week denied recent Iraqi reports that Russia had already signed any oil deals with Baghdad. Iraqi Embassy officials were not available for comment Thursday.

But few doubt that major projects are in the offing.

"Obviously, Russian companies are interested in lifting the ban because in Iraq they will face less competition than anywhere else in the Middle East," said Robert Devane, director of the capital markets and strategies division of IKOS financial boutique in London. "Cooperation between Iraq and Russia is continuing because Iraq has been historically a consumer of Russian oil technology and used Russian service staff and Russian consultants."

Neyev said that Iraq's debts to Russia, estimated at $5 billion to $10 billion, may be involved in LUKoil's potential deals with Iraq, but he did not elaborate. The debt may be used "as a bargaining chip to facilitate the negotiations between Russia and Iraq," Devane said.

Devane added that the volume of potential Iraqi exports in the short term is small enough that it "will not cause Russian oil companies to suffer."

Russian oil companies agreed.

"We sell to different markets than Iraq," said a spokesman for Yukos, Russia's second-largest petroleum firm after LUKoil. "Even if there is a slight change of prices it won't be a big blow for us."

"I don't think there is any danger in Iraq's return to the world market," said LUKoil's Neyev. "We hope all sanctions will be lifted by the end of the year."

Iraq said its ports were ready to export about 700,000 barrels of oil a day within two to three months after negotiations with the UN are completed. World prices already have fallen by about $1 per barrel from their $17 to $18 range, with news reports predicting further falls.

Last year Russia produced 307 million tons of oil and exported 123.6 million tons, mostly to Europe.

Devane said that LUKoil would be followed by Russia's other oil majors. "Yukos, another Russian company with diversified interests, is the second candidate," he said.

But the Yukos representative said his company did not have any projects in the works. "We are not planning anything there," he said. "We don't like Saddam Hussein."