Volume 1 - Iraq Watch

Iraq’s Relationship With RussiaThe former Iraqi Regime sought a relationshipwith Russia to engage in extensive arms purchasesand to gain support for lifting the sanctions in theUNSC. Saddam followed a two-pronged strategy topursue weapons capability while also coping withsanctions imposed following invasion of Kuwait. TheRegime continued to import weapons and technicalexpertise, while seeking diplomatic support forlifting/easing sanctions. Iraq sought to tie other countries’interests to Iraq’s through allocating contractsunder the OFF program and entering into lucrativeconstruction projects to be executed once sanctionshad been lifted. At best, the Iraqi strategy producedmixed results. Russian commercial interests provideda motivation for supporting Iraq; Russian politicaland strategic interests set limits to that support.• March 1997: Russian Energy and Fuels MinisterRodinov went to Baghdad to discuss a $12 billiondeal in an effort to build economic relations withIraq. The deal was signed and was scheduled tobegin once sanctions were lifted.• In 1991, only 15 of Iraq’s 73 discovered fields hadbeen exploited. Development of these reserves inthe post-sanctions period would provide the formerRegime with greater leverage in the world oilmarket. Accordingly, Iraq entered into lucrative oilexploration and exploitation contracts. The lion’sshare of these contracts went to Russian companies.For example, Lukoil received a $4 billion contractin 1997 to develop the second Qurna field, and inApril 2001 Zarubezhchneft and Tatneft received acontract worth $11.1 billion to drill in three Iraqi oilfields. In 2002, a contract was negotiated—but notsigned—for Russian firms to begin exploration ofseveral Iraqi oil fields over a ten-year period. Executionof these contracts was to commence duringsanctions and be fully implemented once sanctionhad been lifted. Iraq hoped these contracts wouldprovide Russia, and other nations, with a significanteconomic interest in pushing for the removal ofsanctions.Regime StrategicIntent• 1999: A Russian delegation traveled to Iraq to provideexpertise on airframes and guidance systemsfor missiles.• Under OFF, 32 percent of the Iraqi contracts wentto Russia.Iraqi attempts to use oil gifts to influence Russianpolicy makers were on a lavish and almost indiscriminatescale. Oil voucher gifts were directed acrossthe political spectrum targeting the new oligarchclass, Russian political parties and offi cials. Lukoil,a Russian oligarch-controlled company received inexcess of 65 million barrels (amounting to a profi t ofnearly 10 million dollars); other oligarch companiessuch as Gazprom and Yukos received lesser amounts;the Liberal Democratic Party leader Zhirinovsky wasa recipient, as was the Russian Communist partyand the Foreign Ministry itself, according to Iraqidocuments. (See Oil Voucher Allocations within theRegime Finance and Procurement chapter for additionalinformation.)39