STRATFOR's
Global Intelligence Update
June 23, 1999
Iraq Tests Russian and Chinese Resolve
Summary:
Now that Russia and China have demonstrated their willingness to
oppose the U.S. and NATO in Kosovo, Baghdad has decided to try to
force their hand in Iraq. The Iraqi oil minister has threatened
that if Russian and Chinese oil companies do not begin work on
developing Iraqi oil fields -- a move that would violate UN
sanctions against Iraq -- they will have their contracts revoked.
While Iraq may be assuming too much with regard to Russia and
China's willingness to deepen their rift with the West at just
this moment, it is only the first of many countries that will
begin to position themselves between the U.S. and NATO on one
hand and Russia and China on the other in the coming months.
Analysis:
According the Iraqi government run newspaper Al-Iqtisadi and
Iraqi legislators, Iraqi Oil Minister Lt. Gen. Amer Mohammed
Rashid has given Russian and Chinese companies "a few weeks" to
begin work on developing Iraqi oil fields, despite the current UN
embargo, or have their contracts terminated. Rashid reportedly
issued the ultimatum when he was questioned in parliament about
the companies' failure to meet their contract obligations.
In 1997, Baghdad signed a contract with a consortium of Russian
oil companies led by Lukoil for the development of the Qurna oil
field in southern Iraq, and another with China National Petroleum
Company for the development of the Ahdad field, also in southern
Iraq. Additionally, a Russian delegation is scheduled to visit
Baghdad this month to discuss a number of other contracts signed
before the imposition of UN sanctions. Iraq has also signed
letters of intent with the French oil companies Total and Elf,
though Rashid refrained from making similar threats toward them.
UN sanctions, in place since Iraq's 1990 invasion of Kuwait, ban
investment in Iraq. And while both Lukoil and China National
Petroleum Company initially agreed to carry out their contracts
regardless of the embargo, they have since decided to abide by
the sanctions until Russia and China succeed in convincing the UN
Security Council to lift the embargo. However, it is not simply
a matter of independent companies trying to avoid overstepping
their respective governments' foreign policies. Both Lukoil and
China National Petroleum Company -- with controlling interest
held by their respective governments -- are willing agents of
their governments' foreign policy. In April of this year, Russia
used Lukoil to pressure Lithuania, which has been moving to free
itself from dependence on Russia for energy. Rashid's comments,
therefore, were not directed at Russian and Chinese businessmen,
but at the Russian and Chinese governments -- ostensibly Iraq's
supporters in the UN Security Council but apparently, in
Baghdad's view, insufficiently enthusiastic backers.
The UN Security Council met June 21 to discuss the embargo
against Iraq, though it made little progress on the issue.
Russia and China have submitted a draft proposal, calling for all
sanctions against Iraq to be lifted if Iraq submits to a new arms
monitoring commission. France, which initially backed the
Russian-Chinese proposal, has submitted a variation on the plan.
Talks are deadlocked, however, as the U.S. and Britain support a
British-Dutch draft proposal that would lift the embargo on Iraqi
oil exports provided Iraq submits to stringent disarmament and
revenue control measures. Iraqi Foreign Minister Mohammed Saeed
al-Sahhaf has rejected the British-Dutch plan, charging that it
would effectively render Iraq a colony.
With little hope of a resolution of the Security Council's
deadlock, Iraq has decided to test the anti-Western mettle
demonstrated by Russia and China during the Kosovo crisis.
Baghdad is gambling that Moscow and Beijing, having established a
precedent by opposing U.S. and NATO action against Yugoslavia,
are now prepared to deepen their rift with the West by opposing
the U.S. led campaign against Iraq. That is a big gamble. While
Russia and China are unequivocal in their opposition to U.S.
global hegemony, they are not set in their strategy or timetable
for opposing the U.S. They will get plenty of diplomatic miles
out of the confrontation over Kosovo, as they extract concessions
in return for "moderating" their policies. To force the issue in
Iraq actually limits the options available to Moscow and Beijing,
as it solidifies their diametrical opposition to the U.S.,
perhaps earlier than they are able to fully perform this role.
Baghdad may have assumed too much in attempting to force the
Russian and Chinese hands, but it still has options. First, Iraq
is unlikely to completely lose the backing of either country, but
particularly Russia, by presenting this ultimatum. Moscow needs
a portal to the Middle East, and with Iran competing with Russia
for influence in Central Asia and the Caucasus, Iraq is a prime
candidate. Furthermore, Iraq still has European countries -- and
their oil companies -- eager to do business. France may still be
able to cut a worthwhile deal with the UN.
Still, Baghdad's attempt to exploit the post-Kosovo political
climate is interesting, and likely will not be the last such
attempt. Russia and China, who have talked about opposing the
U.S. for the last few years, now appear nearly ready to actually
do something about it. Within this evolving dynamic, a host of
peripheral countries will attempt to position themselves, build
alliances, and extract concessions. Let the wheeling and dealing
begin.
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