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. Last Updated: 07/27/2016

Russian Firm Pursues Iraq Upgrade Contract

BAGHDAD, Iraq -- As a leading Iraqi official geared up to travel to Moscow on Wednesday in search of more Russian support at the UN Security Council, a Russian firm said Monday that it is negotiating a $1 billion deal to upgrade a major Iraqi oil field.

The Iraqis are eager to sign the contract, but want the company to start work right away - an action that would violate UN trade sanctions imposed on Iraq for invading Kuwait in 1990, said Alexander Alexeyev, an executive with Russia's Machinoimport, a power and fuel construction company

"They want us to start immediately, but in this situation it is impossible," said Alexeyev, head of Machinoimport's Iraq branch.

The contract, to be implemented in four phases, is expected to add 160,000 barrels per day to the output of the giant North Rumeila oil field in two years. The field is Iraq's most prolific, churning out nearly 1 million barrels per day.

Machinoimport is one of six Russian companies taking part in the oil industry and equipment in Iraq.

Alexeyev said his company is involved in upstream operations and export of spare parts and equipment to help Iraq boost production mainly from southern fields. But he said Machinoimport is careful to limit its activities to the framework of UN trade sanctions, which ban direct foreign investment but allow equipment shipments to rehabilitate the oil industry under a UN-approved oil-for-food deal.

Russian companies control the bulk of Iraq's external trade under the oil program. They also purchase more than 40 percent of the country's oil exports under the deal.

Machinoimport is part of the LUKoil-led consortium that signed a multibillion-dollar deal with Iraq in 1997 to develop Iraq's West Qurna field.

Iraqi Deputy Prime Minister Tariq Aziz flies to Moscow on Wednesday.

Diplomatic sources in Baghdad said Aziz will meet with Foreign Minister Igor Ivanov and Russia's UN Ambassador Sergei Lavrov in Moscow.

The sources, who spoke on condition of anonymity, said a new deal for arms control accompanied by the lifting of economic sanctions will be accepted by Baghdad.

The Security Council is under pressure to approve the resolution to restart arms inspections and offer to suspend crippling sanctions before the end of the year.

While Russia and China favor the suspension of sanctions soon after Iraq allows UN weapons inspectors to return and demonstrates its cooperation, the United States and Britain are demanding a longer waiting period and Iraqi answers to outstanding questions about its disarmament.