Russia Writing Off Debt - LUKoil Wants A West Qurna Deal.

While KRG President Mas'oud Barzani is firmly behind the EPSA approach in the north, defying Baghdad, his partner in Kurdistan, Jalal Talabani, is the president of Iraq and has kept his distance in the dispute between Baghdad and Erbil. Talabani is one of the key figures also behind the central government's efforts to maintain good relations with Russia. On Feb. 8, said he welcomed an expected Russian decision to write off 91% of Iraq's estimated $13 bn debt to Moscow, saying it would be a "historic turning point" in relations between the two countries.

A diplomat at the Iraqi Embassy in Moscow on Feb. 7 said an agreement for the reduction of the debt would be signed during a visit starting on Feb. 10 by Iraqi Foreign Minister Hoshyar Zebari, a Kurd related to Barzani. A Russian Finance Ministry official confirmed that the signing of a debt-restructuring deal was planned. Talabani, Deputy Prime Minister Barham Saleh and other Iraqi officials on Feb. 8 met in Baghdad with a delegation led by the Russian ambassador to Iraq to discuss expanding and developing friendly ties between the two countries in all fields.

In a statement, Talabani's office said: "It is expected that a new agreement will be signed to reduce the Iraqi debt by a proportion of 91%. The two sides have agreed that this will be a historic turning point in relations between the two countries". The Iraqi diplomat in Moscow said the deal was being signed under a 2004 accord in which Russia and other creditor nations agreed to write off 80% of Iraq's debts. The diplomat and the Russian official refused to discuss figures. At the time of the 2004 agreement, President Vladimir Putin said Russia would go further by forgiving some 90% of what Iraq owed, reducing its debt to Moscow to about $1 bn.

The decision to write off Iraqi debt was seen in part as an effort to improve Russian companies' chances of winning contracts in Iraq in the wake of the US-led invasion it strongly opposed. But efforts by Russian oil company LUKoil to regain a role in developing the giant West Qurna field have not produced a deal, and talks on the debt reduction have dragged out.

An APS source in Moscow said LUKoil was still keen on West Qurna. But he declined to comment on rumours that the Russian major was ready to sign a TSA for it similar to the ones being negotiated with the Western IOCs. LUKoil had been insisting on a PSA which it had signed with Saddam's regime in the 1990s, although that regime cancelled the PSA unilaterally shortly before the US invasion.

The Iraqi diplomat said agreement was reached in December. The Iraqi diplomat and the Russian official refused to comment on whether the issues were linked with the case of LUKoil. The diplomat said Zebari would also sign a memorandum of understanding aimed at boosting trade, economic, scientific and cultural co-operation with Russia.