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Analysts Say Economics Explains Moscow's Stand on Iraq - 2002-09-19


This week, Baghdad surprised the world community by telling the United Nations it would agree to the unconditional return of weapons inspectors to Iraq. The news was welcomed by Russia but was dismissed by U.S. President George Bush, who described the Iraqi announcement as a ploy. This is not the first time Russia and the United States have found themselves on opposite sides on the issue of Iraq.

Russian analysts say Moscow's opposition to U.S. military action against Iraq has nothing to do with any loyalty to Saddam Hussein but a lot to do with economics.

Boris Kagarlitsky, who is the political editor of the Russian newspaper Novaya Gazeta, said Russia has financial interests in Iraq and wants to protect them.

"First of all, Iraq is a traditional kind of a partner of Russia," he explained. "In the Soviet period, Iraq was one of the biggest consumers of Russian military hardware. As a result of that, by now, Iraq owes Russia quite a lot of money and it is one of the few countries that not only owes Russia money, but can pay that debt theoretically in hard currency. This is one of the key Russian interests."

Analysts estimate Iraq owes Russia around $7 billion in Soviet-era debt, possibly even more. According to Mr. Kagarlitsky, the Russian leadership is worried that if there is a regime change in Iraq, the new government won't honor the debt to Russia.

And if there is a war, Iraq will be so completely destroyed it won't be able to repay Russia for years, even if it wants to. There has been speculation that Russia is negotiating with Washington for assurances that its economic interests will be protected in Iraq in return for Russian support for military action against Iraq. But so far, the analysts say, there has been no agreement.

Another reason for the U.S.-Russian differences over Iraq is oil. Iraq has the world's second largest oil reserves, behind Saudi Arabia. Russian oil companies, the analysts say, are in a good position to reap economic benefits when the sanctions are lifted. They've already participated in the little oil development that has been allowed under the sanctions.

Ilia Fabrichnikov from the PIR Center, a research organization in Moscow, said if there is no war and sanctions are lifted, Russian oil companies might be favored by the Iraqi government because Moscow pushed for a peaceful resolution to the conflict.

But Mr. Fabrichnikov added that Russian oil companies would lose any advantage they might have if there is a war and a new regime in Iraq. "Should sanctions be lifted through the military operation, I think Western companies such as British Petroleum, Exxon Mobil, will [take over] oil production in Iraq and so will force out Russian oil companies," he pointed out.

Mr. Fabrichnikov said Western oil companies would simply have a lot more money to invest in Iraq than Russian companies.

Another analyst, Boris Makharenko from the Center for Political Technologies, said economics is not the only reason for the differences between the United States and Russia over Iraq. He said Moscow believes that if military action is necessary, it is the responsibility of the United Nations, and not the United States.

"Russia insists that any military action in Iraq should be A, well grounded and B, sanctioned by the international community, namely the United Nations," emphasized Mr. Makharenko. "So I am not prepared to say that Russia is opposed to military action against Iraq per se. It's against a unilateral preventive military action."

Mr. Makharenko also pointed out Russia wants more proof that Iraq is a threat. "Russian politicians do not have convincing evidence of Iraq's accumulation or production of weapons of mass destruction. So, apparently before Russian politicians take a position, they want to see some evidence," he said.

The United States has promised to send a delegation to Moscow in the coming weeks to lay out its position regarding Iraq and hopefully convince Moscow to support it. According to the Russian analysts, the American delegation has a difficult job ahead of it.

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