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. Last Updated: 07/27/2016

No Postwar Oil Contracts for Russia, Zarubezhneft Says


Vedomosti

Head of Zarubezhneft Nikolai Tokarev

Russia has no chance of winning a slice of the oil pie in postwar Iraq as the United States will want to squeeze all its rivals out of the region, the head of a state firm with big interests in Iraq said on Wednesday.

Nikolai Tokarev, head of Zarubezhneft, was skeptical about Russia's -- and his own firm's -- prospects of keeping existing deals and recouping losses by invoking international law against a government that might replace Saddam Hussein's.

But, he said, nor should the world count on quick rehabilitation of Iraq's oil industry and abundant exports from a country he believed was on the verge of civil war and long-term instability.

"There will be nothing good for Russian firms in Iraq," Tokarev said in an interview.

"Americans don't need anyone else in Iraq, they will control Iraqi crude themselves. Nobody will give the green light for Russian or French firms in Iraq."

Russian companies have the most to lose in Iraq should any new government seek investment from leading U.S. and British oil majors to develop crude reserves that rank second in the world in size only to those of Saudi Arabia.

The United States has repeatedly said Russian interests in Iraq should be respected under any new regime. But analysts say this position could change as Moscow remained among the most ardent opponents of the military campaign in Iraq.

Zarubezhneft has been working in Iraq since 1967 and believes it knows the country better than any other Russian or Western oil firm.

In Soviet times, it helped launch Iraq's crucial 1 million barrel-per-day Rumaila field in the southeast, which U.S.-led forces said they captured largely intact this week.

Zarubezhneft has been lifting large volumes of Iraqi crude under the UN oil-for-food humanitarian program and hoped to develop Iraq's giant West Qurna field together with oil giant LUKoil and the smaller Mashinnoimport.

Last year, Baghdad scrapped the deal with LUKoil after the firm said it wanted U.S. guarantees if Hussein was ousted. Iraq said Russian firms would keep the field and Zarubezhneft could become its operator, but Tokarev said the deal was over.

"In strict legal terms, the project exists. We could try to challenge it in international courts, but I see no chance."

"As far as other Iraqi fields are concerned, including Bin Umar, Majnoon and KSP-6 [near West Qurna], we have definitely lost them, because we never signed final agreements."

Iraq and Zarubezhneft started talks on the three fields in January and this came as a shock to French oil major TotalFinaElf, long earmarked for the $3.4 billion Bin Umar project and another big prospect, Majnoon.

Tokarev said he believed cash-rich U.S. and British oil firms were bound to have trouble restoring Iraq's oil industry.

"There will be no big Iraqi crude on the market for a long time and it is a big question whether OPEC will be able to cover this shortage given the region's political instability.

"I think Iraq is set to look like a Palestine for a long time, with snipers and suicide bombers. Americans will be simply unable to work there in normal fashion."

He said it would take years to rebuild an industry destroyed by the war and by Iraqi sabotage and to replace Soviet-era and Russian equipment with Western technologies.

Tokarev said any new Iraqi government was unlikely to repay Russia Soviet-era debts estimated at $9 billion.

"We should not count on this money. Our opponents could well say it was extended to strengthen Saddam's regime, his army and it is out of the question to discuss this issue."

He said Zarubezhneft lost $150 million to $180 million of existing contracts as a result of the U.S.-led invasion and another $25 million worth of drilling equipment near Basra.

"Just who are we supposed to sue? President George W. Bush, the U.S. Army? We can't sue the United Nations."

He said the only chance for Russian firms, which hold contracts in Iraq worth $4 billion, to recoup their losses was to press, along with China and France, for the United Nations to denounce the military operation as "aggression."

"Only then would we have the legal right to appeal to international courts," Tokarev said.