IRAQ - Dec. 12 - LUKoil West Qurna Contracts Terminated.

Vagit Alekperov, head of LUKoil (Russia's largest oil group by reserves), says the Iraqi oil ministry sent a letter to him on Dec. 9, saying that LUKoil's contract in the second phase of the West Qurna oilfield was "null and void" because of a failure to fulfil the obligations to develop the oilfield, which has recoverable reserves of 7.3 bn barrels. (LUKoil holds a 68.5% stake in West Qurna, as well as Zarubezhneft and Mashinoimport, with 3.25%). LUKoil head of external relations Alexander Vasilenko said the company was likely to fight the decision in international courts, stressing that LUKoil had in no way violated the contract and aggressively stating: "We do not understand how a petty bureaucrat from the oil ministry of Iraq can cancel a law that has been passed by Iraq's parliament". Analysts say Baghdad's move is a sign of anger over statements by Alekperov that Moscow is pushing to protect its interests in the oilfield in the event that Pres. Saddam Hussein is removed from power, and indications that Alekperov held secret talks with US Energy Secretary Spencer Abraham. Baghdad's move has puzzled some observers, as it will serve to alienate Russia, which has been one of Baghdad's strongest supporters in the past in efforts to lift economic sanctions and to resist unilateral and military action by the US. It could result in reduced Russian pressure to protect the existing Iraqi administration, and even further enhance LUKoil's chances of winning a fresh contract should a new regime unfriendly to Saddam take power.