Identifier
Created
Classification
Origin
07MOSCOW3930
2007-08-10 13:15:00
CONFIDENTIAL
Embassy Moscow
Cable title:
IRAQI OIL MINISTER SAYS RUSSIA NEEDS TO BID ON OIL
how-toVZCZCXRO7190 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
-------
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
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