TCS Daily

Spoiling the Spoils?

By Dominic Basulto - April 18, 2003 12:00 AM

For the French, Germans and Russians, things weren't supposed to happen like this. The long, hard march on Baghdad turned into a sprint, and within days, the talk was already of seizing oilfields, reconstructing Iraq and doling out contracts to companies (and nations) sympathetic to the war effort. Suddenly, the Russians found themselves at risk of being shut out from any post-war largesse and facing the loss of valuable oil contracts negotiated before the war. Even more troubling from the Russian perspective, the U.S. and British were already asking them to write off $9 billion in sovereign debt and calling into question any future role for the UN in the reconstruction of Iraq.

So are the spoils of war at risk of being spoiled? A recent article in the Wall Street Journal warned that the French and Russians - by virtue of their veto power as permanent members of the UN Security Council - might be able to tie up the export of any Iraqi oil for quite some time. The Russian oil giant LUKOil has already spoken out forcefully, claiming that it will strenuously challenge any effort to undo its oil contracts in international courts, while Russian president Vladimir Putin recently dismissed any notion that Russia would simply write off billions in debt owed by Iraq. As one Russian minister noted, "Nobody has forgiven Russia's debt regardless of what kind of regime it was and regardless of the country's clout..."

It is important to realize that Russia - and other members of the anti-war coalition - have legitimate economic and strategic interests in the region. It is too simplistic a notion to state that, "To the victor goes the spoils." Yet, U.S. legislators are busy drawing up new rules that would effectively ban France, Germany or Russia from participating in any U.S.-financed contracts in Iraq. The first eight contracts, in fact, have already been earmarked for U.S. vendors. Moreover, the U.S. has threatened to erase $12 billion in debt that is owed to the Russian government and private Russian firms - a move that will surely reverberate in the Kremlin.

According to a recent chart published in the Wall Street Journal ("Tapping Iraq's Oil"), over 25 oil companies have secured rights to develop oil fields in Iraq. A consortium of Russian oil firms led by LUKOil negotiated the largest of these deals, the West Qurna oil field (800,000 barrels a day). In addition, Chinese, Pakistani, Turkish, Indonesian and Malaysian oil companies - not to mention the French - have negotiated oil deals with Iraq. Moreover, Russian and French oil suppliers have played a key role in the oil-for-food program established by the UN and are anxious to tap into any future oil deals brokered by the US and Britain.

Secondly, any attempt to freeze out the Russians in Iraq could have repercussions across the globe. Russia has not turned its back on the two other nations in the axis of evil - Iran and North Korea - and could play a leading role in bringing these nations to the negotiating table. In fact, recent pressure by Russian diplomats, working in concert with the Chinese, may have produced enough pressure on North Korea to cool the tense standoff over that country's nuclear weapons program. In Central Asia and the Middle East, also, Russia can play a constructive diplomatic role. Moreover, Russia is a key partner in any discussion of nuclear arms control and anti-terrorism activities. Failure to include Russia in any rebuilding efforts in Iraq, though, will only make Russia a meddlesome influence on the international stage.

Finally, as President Putin emphasized at the recent summit with French and German leaders in St. Petersburg, it is important to avoid a "new Yalta," in which Iraq would be divided into new occupational zones. As one Russian joke goes, it is important to avoid splitting Iraq into three different occupational zones - premium, super and regular. Trying to establish spheres of influence for U.S. and British commercial interests will only hamper the reconstruction effort and act as a brake on the nation-building process. In St. Petersburg, Putin also warned of a "new kind of colonialism" in which the U.S. and its organs (USAID) attempt to refashion the world in the likeness of the Anglosphere.

Of course, Russia hasn't exactly been a giant huggable bear of late - rumors continue to swirl about illicit weapons deals, counter-espionage efforts, and other activities reminiscent of the Cold War era. When and if these claims are verified, companies such as Aviaconversiya (suspected of selling electronic jamming equipment to Iraq) should be ostracized from the bidding process for future contracts. The Russian government, if found guilty of contravening UN sanctions to aid the Hussein regime, should be held to the same standards as other nations.

It is possible, then, to avoid spoiling the spoils of war. Politicizing the process of handing out contracts and trampling on the legitimate rights of other nations (with the emphasis on legitimate) in the anti-war coalition, though, will only make the task of rebuilding Iraq all the more difficult and sow the seeds for future international instability. After all, it is unlikely that France and Russia will remain passive geo-strategic bystanders with billions of dollars at stake in Iraq.

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