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Cablegate: Russia's Finance Ministry On Iraq Debt and August

VZCZCXRO5442
PP RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHMO #3893 2210540
ZNR UUUUU ZZH
P 090540Z AUG 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 2786
INFO RUCNRAQ/IRAQ COLLECTIVE PRIORITY
RUEHGB/AMEMBASSY BAGHDAD PRIORITY 0185
RUEHFR/AMEMBASSY PARIS PRIORITY 1831
RHEHAAA/WHITE HOUSE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY

UNCLAS MOSCOW 003893

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EINV ENRD EPET IZ RS
SUBJECT: RUSSIA'S FINANCE MINISTRY ON IRAQ DEBT AND AUGUST
9 VISIT OF IRAQ OIL MINISTER - CORRECTED VERSION

REF: A. MOSCOW 3891
B. BAGHDAD 2616
C. STATE 107186
D. MOSCOW 3433

1. (S) Deputy Finance Minister Storchak confirmed with the
Embassy that Iraqi Oil Minister Shahrastani will visit Moscow
on August 9 to discuss "commercial cooperation" between the
two countries. Storchak said FinMin Kudrin and officials in
the Presidential Administration have pressed upon their GOR
counterparts not to demand nor expect commercial contracts
out of these discussions. Nonetheless, Storchak said that
the conversations between Sharastani and Russian Minister for
Industry and Energy (MIE) Khristenko must be "fruitful and
productive" to establish the proper framework for a debt
agreement. FinMin Kudrin has limited ability to muster the
consensus needed if Khristenko is not satisfied, Storchak
commented.

2. (S) Storchak said he was privy to internal GOR discussions
during which it was agreed that it would be of great
importance for Shahrastani to meet with Lukoil. The GOR
understands that the Iraqis are not yet prepared to discuss
the West Quarna oil concession, but a meeting with Lukoil
would demonstrate the seriousness by which the Iraqis see
Russian investment as a real possibility. It would also
serve to recognize Lukoil's "special" status in Iraq. Lukoil,
Storchak maintained, should also be acknowledged for its
philanthropic work, such as the training it provides for
Iraqi engineers in its oil and gas institute.

3. (S) While acknowledging once again that there can be no
explicit link between commercial deals and a debt agreement,
Storchak also argued that it would be useful if the Iraqis,
either during Shahrastani's visit or afterwards, would
consider following the Afghan government's example. The
GOA's Finance Minister, during the August 6th debt signing
ceremony, also signed with the GOR a Memorandum of
Understanding that mentioned "commercial spheres of mutual
interest", including in such sectors as transport and
infrastructure, and that Russian companies would be welcome
to compete in the open tender process. He also said that the
atmospherics were greatly improved by Ahad's announcement of
Russian Technopromexport win of a tender for a USD 30 million
power station modernization project. While this was a
business-to-business deal, it underscored Afghanistan's
openness to Russian investment, he commented.

4. (S) Storchak agreed to meet with the Embassy next week to
discuss the Russian reaction to Shahrastani's visit and
whether the timing is - or would soon be right - for Iraq
Finance Minister Jabr to travel to Russia to sign a debt
agreement. He confirmed that all the technical details of the
debt agreement are concluded.

DPRK Debt

5. (S) Taking advantage of the meeting, Storchak reiterated
the GOR's request to have U.S. "moral approval" for it to
begin debt negotiations with the DPRK. Storchak made the
same request to Treasury DepSec Kimmitt during last week's
APEC meeting, and to State U/S Jeffery during the latter's
July 16-18th visit to Moscow. He said the GOR has proposed
the fall for talks, and noted that the DPRK already has sent
delegations to Moscow twice this year for informal
discussions. The next round will likely be held in Pyongyang.

Comment:
-------

6. (S) The agreement with Afghanistan, after months of delays
and negotiations, should be welcomed. That said, the add-ons
to the agreement, while just promises, could set the bar
higher for an agreement with Iraq. The GOR got the political
cover necessary from Afghanistan to seal the deal. They will
likely expect no less from Iraq.
RUSSELL

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