Oil bonanza fuels diplomatic rift

UNDERLYING the tension between Washington, Paris and Moscow over the latest Gulf crisis are more than just differences in diplomatic style. Behind the scenes and the bluster there is a struggle for future economic opportunities in Iraq.

Since May, representatives of oil companies from most developed countries, including Britain and the United States - drawn by the lure of multi-billion dollar deals - have been making 'exploratory' overtures to Baghdad to prepare for the lifting of economic sanctions.

Iraqi Trade Ministry sources say memorandums of agreements with several companies, some worth dollars 1bn (dollars 630m), have been drawn up and bind Iraq to signing contracts once sanctions are lifted. However, American firms are banned by US law from business dealings in Baghdad and have lost out.

France and Russia, unhindered by such legalities, have fared the best of all and, by no coincidence, are the keenest of all UN Security Council members to ease sanctions.

Paris incurred Washington's ire last week by questioning the motives of the massive troop build-up in response to Iraqi's massing of troops on Kuwait's border.

But when the US envoy to the UN, Madeleine Albright, attacked Paris for its comments, she lashed out at France's pocketbook. Paris, she said, wanted the UN international community to take a more conciliatory line on Iraq for reasons of commercial advantage.

'Ms Albright was not being entirely ingenuous,' one oil-industry source in London said. 'She knows Exxon would give its right arm to get its foot in the door in Iraq. It's just that France has been peddling a softer line, which has no doubt allowed the French to be better poised to clinch a deal once sanctions are removed.'

Two French national oil companies, Total and Elf, have plans to go in and run the Majnoun oilfields in Iraq's southern marshes, near the border with Iran. The Majnoun area is reported to be one of the world's biggest untapped oilfields, with an estimated 3-billion-barrel reserve.

Serge Tchuruk, Total's chairman, confirmed in May that his company has had talks with Iraq on developing the country's potential, but said: 'It is out of the question for Total to do anything with Iraq before sanctions are lifted.'

According to US sources and moderate Shias, who would not mind seeing French deals scuppered, one motive behind President Saddam Hussein's latest brutal campaign against the Shias in the marshes was to make it easier for the French to exploit the oilfields.

Russian companies also have well-advanced deals in Iraq, according to press reports and industry sources. In August, Russia's Interfax news agency quoted unnamed sources in Russia's Trade Ministry as saying Moscow had allegedly reached a pounds 1bn agreement to rebuild Iraqi oilfields damaged during the Gulf war.