07MOSCOW3930, IRAQI OIL MINISTER SAYS RUSSIA NEEDS TO BID ON OIL

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Reference ID Created Released Classification Origin
07MOSCOW3930 2007-08-10 13:15 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO7190
PP RUEHBC RUEHDE RUEHIHL RUEHKUK
DE RUEHMO #3930/01 2221315
ZNY CCCCC ZZH
P 101315Z AUG 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 2833
INFO RUCNRAQ/IRAQ COLLECTIVE PRIORITY
RUEHGB/AMEMBASSY BAGHDAD PRIORITY 0187
RUEHFR/AMEMBASSY PARIS PRIORITY 1833
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHAAA/WHITE HOUSE WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 003930 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EUR/RUS, FOR EEB/ESC/IEC GALLOGLY AND GARVERICK, 
AND FOR S/I 
DOE FOR HARBERT, HEGBORG, EKIMOFF 
DOC FOR 4231/IEP/EUR/JBROUGHER 
NSC FOR MCKIBBEN 
 
E.O. 12958: DECL: 08/10/2017 
TAGS: EPET ENRG ECON PREL RS IZ
SUBJECT: IRAQI OIL MINISTER SAYS RUSSIA NEEDS TO BID ON OIL 
FIELDS ON EQUAL TERMS 
 
REF: MOSCOW 3901 
 
Classified By: Econ A/MC Kathleen Doherty  Reasons 1.4 (b/d). 
 
------- 
SUMMARY 
------- 
 
1. (SBU) Visiting Iraqi Oil Minister Shahristani told the 
press in Moscow that Iraq's 27 largest producing fields would 
be transferred to the Iraqi National Oil Company, which could 
then choose partners on transparent and commercial terms. 
The news appears to dash the hopes of Russia's Lukoil, which 
had a Saddam-era deal to develop West Qurna, one of the 
fields.  Shahristani said other blocks would be available for 
bids by potential developers, but that no company or country 
would receive any preferential treatment.  He added that 
Lukoil could have a competitive advantage given its previous 
experience in Iraq.  The GOR seemed to expect preferential 
treatment in indirect exchange for debt forgiveness (reftel), 
which may be affected by the news.  According to separate 
press reports, however, Shahristani said that Russia was 
clear that the issues are unrelated.  Post has not yet 
received word from the Finance Ministry (reftel) whether the 
time is appropriate for Iraq Finance Minister Jabr to travel 
to Moscow to sign a debt agreement.  End Summary. 
 
-------------------------------- 
FREE AND TRANSPARENT OIL TENDERS 
-------------------------------- 
 
2. (SBU) Iraqi Oil Minister Hussain al-Shahristani met on 
August 9 with Russian Minister of Industry and Energy Viktor 
Khristenko and Lukoil president Vagit Alekperov, among 
others, as part of his visit to Moscow (reftel).  Shahristani 
held a press conference during which he said "There will be 
no specific talks with any company over any particular 
field."  Shahristani explained that once the new law 
governing the Iraqi oil sector is in place, the GOI would 
welcome bids by all qualified companies to develop the fields 
not allocated to the Iraqi National Oil Company (INOC).  He 
said the country's 27 producing oil fields would be 
transferred to the INOC, who would then have the option of 
partnering with other oil companies on commercial terms. 
Press reports quote Shahristani as saying that all deals will 
be done through "free and transparent tenders."  He expects 
the new law to go into effect in September. 
 
3. (SBU) The news appears to be a blow to Russia's Lukoil 
which had a Saddam-era deal to develop West Qurna, one of the 
fields given to INOC.  Shahristani did apparently offer some 
hope to Lukoil, saying that the company's experience in Iraq 
and its knowledge of Iraqi oil fields "increase the chances 
of it winning the free and transparent oil tenders."  Some in 
press, while noting that Russia did not get what it wanted, 
were at least encouraged that Russian firms would not be 
discriminated against due to Russia's stance against the war. 
 A perception persists that the USG will influence Iraq's 
decisions on oil development partners. 
 
4. (SBU) The inability of Lukoil to secure an agreement for 
some form of preferential treatment may affect Russia's 
decision on Iraqi debt relief (reftel).  At least two 
articles quoted Shahristani as saying Russia had committed to 
debt relief with no strings attached. 
 
5. (SBU) Most investment analysts who covered the story 
focused on the impact on Lukoil, which they generally agreed 
would be minimal given that few expected Lukoil to keep the 
field.  In addition to the advantage for Lukoil suggested by 
Shahristani, analysts speculated that Lukoil's partnership 
with ConocoPhillips (which owns 20% of Lukoil) could help it 
secure some piece of the Iraqi oil pie. 
 
------- 
COMMENT 
------- 
 
 
MOSCOW 00003930  002 OF 002 
 
 
6. (C) Contacts at MIE, Lukoil, and ConocoPhillips offered no 
insights beyond what was reported in the press.  However, 
Lukoil is surely displeased with this outcome, perhaps 
consequently affecting the mood of Khristenko.  Given the way 
business and government work more explicitly hand-in-hand in 
Russia, it may be difficult for the GOR to accept simple 
goodwill as the reward for its debt relief offer.  If press 
reports are accurate, however, and Shahristani accurately 
reads his Russian counterparts, debt forgiveness could 
hopefully move forward.  Indeed, Khristenko was quoted in one 
Russian press report as saying that debt forgiveness should 
happen.  We expect an official indication on this soon. 
RUSSELL

Wikileaks

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