Soviet Stake In Iraqi Oil Industry

Press, Volume CIX, Issue 32076, 26 August 1969, Page 5

Soviet Stake In Iraqi Oil Industry

(N.Z.P.. A.-Reuter —Copyright) BEIRUT. The Soviet Union has won an economic foothold in the Persian Gulf and a stake in the Iraqi oil industry under a major aid agreement announced in Bagdad this month.

But the oil deal, part of a series of agreements for Communist aid in Iraq’s economic development recently negotiated by the Ba’athist Government in Bagdad, does not appear to threaten Western dominance in the Iraqi oil industry. The Russians stand to gain access to a new source of crude oil and a closer political relationship with Iraq’s Ba’athist (Arab Socialist) leaders, who are showing signs of readiness for an accommodation with local Communists. As well as a Russian market, the Iraqis Will gain expert help and finance to develop oilfields which have lain unexploited since they were expropriated from the Iraq Petroleum Company (1.P.C.) eight year’s ago. The oil to be produced with Soviet help by the Iraq National Oil Company (1.N.0.C.), which has no output at present, will not therefore be competing on world markets with the products of 1.P.C., which is owned by a consortium of Western oil giants—Shell, British Petroleum, Compagnie Francaise des Petroles, Standard Oil (New Jersey), and Mobil. The real setback for I.P.C. is that the deal is for the exploitation of the North Rumaila field, near Basra, which was originally an I.P.C. concession but which was expropriated by the Iraqis in 1961. I.P.C. had earlier testdrilled in North Rumaila. Three of the six test wells were producers, although these are now closed. North Rumaila is geologically a continuation of the rich Kuwait and South Rumaila fields, and I.P.C. experts have no doubt that they contain large reserves. Th.e company has been fight-

ing the expropriation order and in 1964-65 negotiated a settlement with Iraq under which some of its expropriated acreage, including North Rumaila, would have been returned. But the agreement was never ratified by the Government and now the Iraqi-Soviet deal seems to give a death blow to I.P.C.’s hopes of recovering North Rumaila.

Under the deal, the Soviet Union will help Iraq with projects to produce 18 million tons of crude oil annually, according to an 1.N.0.C. spokesman in Bagdad. The agreement, also provided for the installation of a pipeline from the oil-producing area in Southern Iraq to the terminal on the estuary of the Shatt-al-Arab River. Under the agreement, the first quarter of 1972 is the date for the start of oil production. The Soviet Union would provide loans totalling 60 million roubles (about ss6m) at 2.5, per cent interest, the spokesman said. This would be repaid through the sale of Iraqi crude oil to Russia at prices on the freeworld oil market. Economic Agreements One of the highlights of this month’s celebrations of the Iraqi revolutions of 1958 and 1968 was the laying of the foundation stone of the North Rumaila installations. It was a symbolic conclusion to a series of economic agreements with European Communist states. In rapid succession the Iraqis have secured a deal for Polish aid in exploiting sulphur reserves and a 30 million dinar (about s7sm) loan from East Germany to finance industrial projects. However, Western specialists in Beirut are reserving judgment about the extent to which these major Communist aid agreements will help Iraq break through to economic prosperity. The country has enjoyed a handsome oil revenue since before World War 11. It now totals about s27Bm a year from the Western companies.

But Iraq has always found difficulty in spending on constructive projects all the oil revenue allocated for industrial development. Iraq’s drive towards economic self-sufficiency has been hampered by bureaucratic delays, laek of technical expertise, corruption, and a certain aversion to hard work in a harsh .desert climate by labourers debilitated by disease and with no strong commitment either to Royalist or Republican regimes. In its one year in office, the Ba’athist leadership has displayed great energy in initiating new projects and purging corruption., But it remains to be seen whether it can couple popular support and willingness for sacrifice to the financial and technical resources now made available to Iraq to achieve economic strength.