RUSSIA NOT LINKING IRAQ DEBT FORGIVENESS WITH

C O N F I D E N T I A L MOSCOW 005299 SIPDIS SIPDIS EUR/RUS, EEB/IFD/OMA NSC FOR WARLICK E.O. 12958: DECL: 11/07/2017 TAGS: ECON EINV PREL RS SUBJECT: RUSSIA NOT LINKING IRAQ DEBT FORGIVENESS WITH LUKOIL CONTRACT REF: A. MOSCOW 4540 ¶B. MOSCOW 3930 ¶C. MOSCOW 3901 Classified By: Economic Minister Counselor Eric T. Schultz for reasons 1.4 b and d. ¶1. (SBU) Deputy Finance Minister Sergey Storchak told us November 5th that Russia has not made, and will not make, a link between its debt forgiveness obligation and the Saddam-era Lukoil contract for the West Qurna oil field development. Storchak said Russia's representatives at this month's Paris Club meetings would make clear there was no linkage. In addition, following our meeting, an unidentified Finance Ministry source reaffirmed the lack of linkage in an interview with Russian news wire service RIA Novosti on November 6. "As before, we do not link directly one thing to the other," he was quoted as saying. (N.B. A November 4 New York Times article stated that after being officially informed by the GOI that it had canceled the Lukoil contract, Russia had threatened to not fulfill its obligations under a 2004 Paris Club agreement to forgive Iraqi debt. The information in the New York Times article was not new. Iraq's Oil Minister told the GOR in early August that the tender process for all oil field developments would be open. Ref b) ¶2. (C) Storchak, nonetheless, reiterated the GOR's strong interest in signing a memorandum of understanding with Iraq that would identify areas for economic cooperation (ref c). According to Storchak, the Russian MFA prepared a draft MOU, delivered it to the Iraqis a month ago, and is awaiting a response. The GOR expects a document similar in spirit to the MOU signed with Afghanistan, which was completed prior to the signature of the GOR/GOA debt forgiveness deal (ref c). In contrast to previous remarks by Finance Minister Kudrin, who expressed optimism that an agreement would be signed before the end of the year (ref a),Storchak notably would not provide a guess as to when Russia would sign an accord. ¶3. (C) Comment: The lack of sufficient GOR internal support has long been the obstacle to a debt deal. We believe the MOU is intended to buttress such support. End Comment. BURNS