Washington certainly will not have been pleased, but this week’s deal between Iraq and Russian oil and gas companies may be as politically significant as it is commercially.
The oil field development deals for Russian firms Stroitransgas and Soyuzneftgas and the return of Lukoil to the West Kurna oil field, from which it has been thrown out last year, for failing to start contracted work, is something of a business triumph. Russian oil companies already have a direct interest in a third of Iraqi oil and gas production. The question now is whether those assets will be worth very much in the event of a US attack. While Washington’s war planes are unlikely to target oil field installations, Saddam Hussein demonstrated in Kuwait that his regime has made a specialty of blowing them up itself. In the worst-case analysis, one of Saddam’s final acts might be to order the destruction of Iraqi well heads. However, in the long term this would be a futile gesture as Kuwait also proved.
What the Russians have done is to increase their position in the Iraqi oil market at a time when Saddam is increasingly desperate for any lever that might ward off American aggression.
Analyzed coldly, Russian investors are in a win-win position. If Saddam manages to hold on to power, Russian oil companies in Iraq would not only be back in business in a big way, but Russian exporters will come flooding into a market where they might reasonably expect to enjoy some sort of preferential treatment, especially if Moscow had been clearly instrumental in staving off a US attack. If however the worst happens and George W Bush and Tony Blair find a half-decent excuse to order in their military, the Russian position in a post-Saddam Iraq would still be a strong one. While the Americans and the British will have to cope with the hornet’s nest of discontent that would result from an occupied Iraq, the Russians will be able to capitalize on their strong market position. What is more, Washington will not be able to blame Moscow for taking advantage of a commercial opportunity. If this is really a war about oil, as many pundits believe, then it will be a war about the two thirds of the oil in which the Russian’s don’t have an interest. It seems unthinkable that Washington would challenge Russian control of these remaining assets.
Russian activity in Iraq should not however be seen in isolation. It is part of a wider interest in the Middle East, which is prompted this time not by geopolitical rivalry but by commercial considerations. The Russians can be expected to make a better fist this time of their relations with the region, than they did during the Cold War. From the moment they eased the Americans out of the Aswan Dam project in 1956 to the day Anwar Sadat threw them out of Egypt in 1972, Moscow’s men made a series of errors in their attempts to win hearts and minds in the Middle East. Indeed, nothing so became their inept Middle Eastern foreign policy as the manner in which they abandoned it. Russian aviation technicians left Egypt taking all the spare parts for the MiG fighters they had sold that country and in Somalia, when they quit, they demolished and took with them a fish processing factory, which had been a “gift from the Soviet people”.
Even though modern Russia is most unlikely to offer any regional military engagement, it is probable that its growing commercial interests in the Middle East will act as an important counter balance to a United States ever more willing to throw its weight around. At present its influence is unlikely to be decisive with the White House, but Russia’s deals in Iraq should nevertheless give President Bush and his team pause for thought.
