Iraq Eyes Compensation from Russia if Oil-For-Food Claims Prove True

By Sergei Blagov | July 7, 2008 | 8:15 PM EDT

Moscow ( - Russian President Vladimir Putin told visiting Iraqi Prime Minister Iyad Allawi that his country would write off 90 percent of the debt owed it by Iraq, making it clear Russian companies hoped to benefit from future deals as a result.

Putin told Allawi that the decision was taken out of solidarity with the Iraqi people, and added: "Simultaneously, we assume that your administration and the future Iraqi government would respect interests of Russian companies."

Earlier, Iraq's ambassador in Moscow had said Baghdad would like to see Russia write off the entire debt and would additionally press for compensation if allegations that Russian firms improperly benefited from the U.N. oil-for-food program during the sanctions era were found to be true.

"If there is real evidence behind accusations against any Russian companies, the Iraqi authorities will demand compensation," the Interfax news agency quoted Ambassador Abdul Hashim Mustafa as saying.

Mustafa also told the agency that Iraq would "certainly prefer to have the country's entire [$8 billion] debt written off."

Various probes into claims of large-scale corruption in the food-for-oil program are currently underway, including an official independent inquiry commissioned by the U.N. and headed by former Federal Reserve chairman Paul Volcker.

Russian, French and Chinese firms and individuals were among the primary beneficiaries of what amounted to bribery by Saddam Hussein, according to the allegations under investigation.

There was no mention in Russian news reports that the issue came up during the high-level talks in Moscow involving Allawi and other top officials in the interim government.

Earlier this month, Russia dismissed accusations by Volcker that Moscow was refusing to cooperate with his investigation.

"Russia is co-operating with the so-called independent Volcker Commission," deputy foreign minister Yury Fedotov said.

Inquiry team members visited Russia in mid-November, although no details were released about what was discussed.

The oil-for-food program began in 1996 as an attempt to lessen the impact of sanctions on ordinary Iraqis. The U.N. allowed Iraq to export oil and buy food, medicine and other humanitarian goods.

Several U.S. lawmakers and others have called on U.N. Secretary General Kofi Annan to resign because of the scandal that took place on his watch.

Russia last Friday condemned what it called "unfounded attacks on the U.N. leadership."

"An ad-hoc commission with a specific mandate has been set up at the U.N. to investigate suspicions ... and it is necessary to wait for the results of its work," the foreign ministry said in a statement.

Meanwhile, Putin told Allawi that he had serious doubts about plans for elections in Iraq next month.

"I cannot imagine how elections can be held under a full occupation of the country by foreign troops," Putin said, and then added: "At the same time, I don't understand how you alone can remedy the situation in the country and prevent its disintegration."

Russia, a key opponent of the U.S.-led war that ousted Saddam, has refused to send troops to help the rebuilding process. It has agreed to help Iraq's recovery in other ways, such as training Iraqi oil industry workers.

Despite his remarks on the election, Putin pointed out that his government had supported a U.N. Security Council resolution backing elections in Iraq on Jan. 30.

Russia was "ready to support your efforts to stabilize the situation in the country," he told the Iraqi leader.

Russia hopes to win back lucrative oil contracts signed during the Saddam era in return for the 90 percent debt write-off.

Russian Industry and Energy Minister Viktor Khristenko, who also took part in the talks with the Iraqis, told journalists here the two governments would hold a meeting of a bilateral commission next February and also audit all previous bilateral contracts.

"Russia and Iraq are interested in protecting and further developing the traditional friendly ties and mutually beneficial cooperation that have long been connecting the two nations," the foreign ministry said in a statement.

"Both sides are discussing the issues of increasing Russian participation in the post-crisis restoration of Iraq."

(CNSNews International Editor Patrick Goodenough contributed to this report.)

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