Iraq in Play

10.20.12

Russia Angles for More Mideast Influence by Selling Arms to Iraq and Buying Its Oil

Aiming to regain some leverage in the Middle East, Vladimir Putin’s Kremlin is following a traditional recipe: buy oil and sell arms. Anna Nemtzova reports.

The Kremlin is reviving its fading influence in the Middle East, and it’s doing it the traditional way: by drawing up oil and military contracts. Currently Iraq is Russia’s most promising partner. At their most recent meeting in Moscow earlier this month, Russian President Vladimir Putin and Iraqi Prime Minister Nouri al-Maliki negotiated a $4.2 billion weapons deal signed by the two states. They also discussed the possibilities of enlarging the energy contracts for Russian oil companies.

In the last four years Russia has sold Iraq arms worth $246 million, a rather insignificant figure compared to the $6.5 billion in weapons and ammunition that Iraq purchased from the United States in the same time period. So far Washington has shown no intention of interfering with Russia’s plans to sell 30 Mi-28 attack helicopters and 50 Pantsir-S1 surface-to-air missile systems to Iraq, the deals negotiated this month. “It is obvious that American influence in Iraq is overestimated. The Shiite government begins to lead a more independent politics from Washington,” said Ruslan Pukhov, director of the Centre for Analysis of Strategies and Technologies, summing up the Russian view that now is the time to make a move in Baghdad.

Iraqi oil fields look promising for Russia, both as energy resources and as a way to ensure its military-industrial future in Iraq. This week Exxon informed the Iraqi government of its plans to move to Kurdistan, so Russian companies have a chance to dominate Iraqi oil industry if they buy Exxon’s West Qurna 1 project, which is worth $50 billion. Yesterday at Georgetown University, U.S. Secretary of State Hillary Clinton said she was not worried about Russia becoming the biggest producer in Iraq, as eventually the oil Russian companies supply to the world’s markets becomes accessible for all participants.

In spite of instability in Iraq, Russian oil companies would be happy to enlarge their operations in Iraq, and Lukoil, one of the two Russian oil companies already operating in Iraq, is the most likely candidate to become Exxon’s replacement. “More contracts would be interesting both economically and politically,” said Mikhail Leontyev-Romakov, a Lukoil spokesman. Currently, Lukoil has a service contract in partnership with Iraqi state-run North Oil Company for exploring the West Qurna 2 field, which has the potential capacity to produce 1.8 million barrels per year. This week Gasprom Neft, the oil division of Russia’s major gas giant Gasprom, froze its two contracts for oil development in the politically sensitive Kurdistan region. Gasprom Neft is producing oil in Badra, near the Iranian border.

Russian money is attractive for Iraq, where the decade-long war destroyed $800 billion worth of infrastructure. According to Lukoil’s Leontyev-Romakov, the company is investing $25 billion to $30 billion in infrastructure at West Qurna-2, which could start pumping oil by 2014. That would be the company’s biggest project, and its most dangerous project in terms of security. “We have a mega project in Iraq and we would like to enlarge our operation. The company’s capacity allows that,” Leontyev-Romakov said, adding that oil production in Iraq is a big risk in a big game.

Skeptics doubt that its economic interests are what motivate Russia’s cooperation with Iraq. According to Dmitry Oreshkin, an independent political analyst and founder of the Mercator Analyst Group, deals in Iraq look like an expensive foreign policy move for Russia. "It reminds me of the old Soviet strategy to please everybody in the Middle East, Latin America, and Africa purely for competition and not for profit, just to play on American nerves,” Oreshkin said.