MOSCOW, Dec 15: Russia’s top oil firm LUKOIL said on Sunday that Moscow’s support for last month’s United Nations resolution on disarming Iraq had pushed Baghdad to scrap a $3.7 billion deal to develop a huge oilfield.

LUKOIL President Vagit Alekperov told Reuters in an interview he saw no US pressure behind the Iraqi decision to break off an accord on the West Qurna oilfield. He suggested other Russian and Chinese contracts with Baghdad could be next.

“There were no economic grounds, because the situation with West Qurna was simply the same as it had stood two or three years ago,” he said.

“What has been done, I think, is more linked to the reaction to Russia’s position on UN inspectors. Russia supported actions which seemed clear and logical to the international community.”

The future of Iraq’s crude reserves, the world’s second largest after Saudi Arabia’s, are at the centre of a diplomatic tug-of-war between countries hoping to grab a share of Baghdad’s oil wealth once United Nations sanctions are lifted.

Iraq’s ambassador to Russia said Moscow and Baghdad would continue to work together despite the broken contract.

“We are continuing to cooperate with Russian companies, especially in the strategic area of oil and gas,” Abbas Khalaf told an Abu Dhabi television correspondent who provided Reuters with a translation of his Arabic language comments.

“It’s normal for these kinds of conflicts to arise between partners. This is being highlighted because the contract is a big one.”

Russia’s Foreign Ministry said the Iraqi decision “runs counter to the friendly nature of Russian-Iraqi relations”.

“It is bewildering that it has been taken at a time when Russia is...working with other states to solve the Iraqi issue through peaceful, political means,” a ministry statement said.

Russia, long the biggest defender of Iraq’s interests on the UN Security Council, pressed for changes before backing the resolution calling for the resumption of inspections to determine whether Baghdad held weapons of mass destruction.

The resolution is widely seen as a last chance for Iraqi President Saddam Hussein to avoid a US-led strike on Baghdad.

LUKOIL said on Thursday it had received a letter from the Iraqi Energy Ministry saying Baghdad had rescinded the 1997 deal, signed with LUKOIL and two smaller firms to develop West Qurna. The region has oil reserves of several billion barrels.

Baghdad has said the deal was scrapped because no major work had been carried out on the field since 1997. LUKOIL says it was waiting for the lifting of UN sanctions, imposed on Iraq when it invaded Kuwait in 1990, to start massive investment.

Alekperov, effectively chief executive of LUKOIL, said on Sunday he considered the deal still valid.

“Those actions are of course making other Russian firms wary of working in Iraq,” he said. Russia and Iraq, he added, had signed contracts worth billions of dollars.

“If such actions are taken today against us, I think tomorrow or the day after tomorrow we could expect Iraq to take similar steps against Chinese companies.”

China National Petroleum Corp (CNPC) has a contract to develop the $700 million Al-Ahdab field, the largest oil development deal signed in the country after West Qurna.

LUKOIL has said it was looking for guarantees from both Moscow and Washington that it would not lose the field to major US oil companies if the United States ousted Saddam.

Alekperov said LUKOIL was defending Russia’s interests. “And I believe that our government and president should support and defend interests of LUKOIL and other Russian companies”.

He dismissed any suggestion that the Iraqi decision could be inspired by the interests of US business.

“I cannot accept the notion that this plays into the hands of our American colleagues,” he said.

He still believed in a peaceful solution in Iraq, but in the event of war there would be no sharp oil price rise due to extra supplies from other producers. Nor would prices collapse, he said, if US oil majors explored Iraqi reserves.

“World oil consumption is growing while oil output in traditional regions is declining. Nobody is interested in very high or very low prices,” he said.—Reuters