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. Last Updated: 07/27/2016

UN Vote 'Sold' for Iraqi Oil and Debt

Russia dropped its opposition to a UN resolution lifting sanctions on Iraq once it believed its Soviet-era debt and massive oil contracts in the country would be respected, the Russian press said Friday.

"Russia 'sold' its vote in exchange for the respect of contracts and debt," Izvestia said.

Kommersant accused the Russian leadership of abandoning its principles in voting for the resolution, abandoning its demand that UN weapons inspectors return to the country to ensure it is free of weapons of mass destruction before lifting sanctions.

After weeks of opposition to the U.S.-sponsored resolution, Russia voted in favor Thursday of lifting the 13-year-old sanctions on Iraq, effectively handing over temporary control of Iraq's oil revenues to the United States and its allies through an internationally-audited Development Fund.

"U.S. concessions made to the anti-war coalition do not change the substance of things, but help save face for those who extolled the key role of the UN," Izvestia said.

The daily said a key point in winning Russia's approval was the U.S. concession to reschedule Iraq's debt -- including $8 billion owed to Moscow -- through the Paris Club.

Yet the resolution effectively establishes a moratorium on the debt by declaring Iraq's oil revenues immune from legal proceedings until Dec. 31, 2007.

And the resolution did not put a deadline on relinquishing U.S.-British control of the country, merely scheduling a review in 12 months and the promise that an internationally recognized government would eventually be set up by the Iraqi people.

Yet the pro-Kremlin Vremya Novostei daily declared in a headline that "everyone won in Iraq" -- sanctions were lifted while the United Nations won a role in postwar Iraq.

In weeks of tense negotiations, Russia argued for strong UN involvement in the country, anxious to ensure that its debt, as well as billions of dollars in undeveloped oil contracts, did not fall entirely into U.S.-British hands.

The biggest Russian prize is a $3.7 billion contract secured by one of the country's biggest oil companies, LUKoil, to develop the prized West Qurna oil field.

The former Iraqi regime cancelled that contract in 2002 on the grounds of nonperformance by LUKoil, although the company says it will sue any new contender.

"To the extent it [the resolution] re-establishes United Nations authority it could be said to be good. With the United Nations back in the game Russia's position is improved," said Jonathan Stern, an energy analyst at the Royal Institute of International Affairs in London.

Foreign Minister Igor Ivanov was quoted by as saying in Paris on Thursday that the new UN Security Council resolution would create a favorable environment for Russia to take part in the postwar rebuilding of Iraq.

He also said Moscow would insist on existing oil contracts being honored.

But Russia's fight to secure its oil interests in Iraq is far from over. "I would say Russia has some advantages. They know how to work in Iraq where a lot of equipment is already Russian," said oil analyst Ivan Mazalov at Commerzbank Securities in London.

But, he added, "there will be pressure to diversify contracts away from Russia."

How the cards fall for Russia's interests may not become clear for a year or two, by which time a new Iraqi government may have rewritten the country's oil investment rules.

"The final decision can only be taken by an Iraqi authority," said Christopher Granville, a strategist in London with Moscow-based investment house United Financial Group.

Russia has also scored a coup by rebuffing calls from some hard line members of the United States administration, among them Deputy Defense Secretary Paul Wolfowitz, to write off $8 billion in Soviet era debt owed by Baghdad.

"Russia has won quite a victory over the neo-conservative lobby," said Granville. "Paul Wolfowitz said the debt should be written off. Russia said it is still paying off its own Soviet era debt and silenced the hard line lobby."

(AFP, Reuters)