LUKoil spokesman Mikhailov said the first priority of the two-day visit to Baghdad is to secure that the oil field contract remains in LUKoil hands. He said LUKoil still considers its contract valid despite an announcement by Iraq late last year that it was tearing it up because LUKoil had failed to meet its obligations to develop the West Qurna field, thought to hold about 2.5 billion tons of oil reserves. Mikhailov said the deal could only be voided by decision of an international arbitration court.
Russian oil companies, including the biggest - LUKoil - fear they might lose their competitive edge in Iraq to richer US oil giants if a successful military strike leads to Saddam Hussein's ouster. There are reports that executives from Exxon Mobil Corporation, Chevron Texaco Corporation, Conoco Philips and Halliburton met with the staff of Vice-President Dick Cheney in October 2002 to discuss a future carve-up of Iraqi oil. The Bush administration denies that the meeting took place.
Last month, Iraqi Deputy Prime Minister Tariq Aziz accused LUKoil of trying to win US guarantees that its stake in the West Qurna field would be retained under a new regime. He said this "outrageous" behavior was the reason for the deal being cancelled. LUKoil's stake is estimated to be worth $20 billion. Leading Iraqi Oil Ministry officials have promised the West Qurna field would be reserved for another Russian company. LUKoil Vice-President Leonid Fedoun sharply criticized the Iraqi Government for deciding to break the deal, which could not be implemented due to UN sanctions. "We have not violated any terms of the contract," he said in a recent interview and LUKoil had not conducted any official talks with the United States about guarantees for its stake. He would not say whether the matter had been discussed unofficially "but there is nothing in the contract that prevents us from having contacts with whomever we want."
Stroitransgaz spokeswoman Valentina Smirnova said the company was hoping to sign a deal to develop Block Four of the Western Desert field during the trip. "All the formalities have already been agreed," she said. "All that remains is to get the signatures of both sides." She could not say how much the contract might be worth or what is the volume of oil reserves in the field contains. Iraq was dangling licenses for the vast Nahr Umr field before Russian state-owned companies Rosneft and Zarubezhneft. Both of these companies refused to comment on whether negotiations were being held over rights to the field, which has estimated reserves of 3 billion tons. Zarubezheneft head Tokarev, however, said that the companies were near to clinching a deal.
