LOS ANGELES, April 14 (UPI) -- The lawlessness plaguing the streets of Baghdad will no doubt be long over before the current legal vacuum around Iraq's prized oil industry is filled and Iraq once again becomes a major crude supplier.
While U.S. and British troops in the capital waited for the chaos to wind down, a Russian oil executive declared Monday that his company would not simply walk away from its investments in the oil-rich nation simply because the regime it had been dealing with no longer existed.
In what could be the first of many claims on the Iraqi oilfields, LUKoil President Vagit Alekperov said that his company was working on ways to defend the lucrative contract it signed in 1997 for the development of Iraq's Western Qurna-2 oil field.
"In 13 years, the company will earn about $20 billion and the Russian government $16 billion by developing the Western Qurna-2 deposit," Alekperov told Russia's Itar-Tass news service.
LUKoil had been unable to actually commence its work in the field, which contains an estimated 7 billion barrels of crude, due to U.N. sanctions after the 1991 Gulf War.
Saddam Hussein's government declared the production-sharing pact void last February; however, Alekperov said LUKoil wasn't ready to accept the cancellation and urged the Russian government to get involved in the effort that has the makings of a contentious combination of legal and diplomatic campaigning.
The resumption of oil exports is a major goal of the U.S.-British coalition that overran Iraq and the coalition must now put the petroleum-rich nation on track to form a new government after decades of dictatorial rule by Saddam and his regime.
"We have now secured both the northern and the southern oil fields," Pentagon spokeswoman Victoria Clarke told reporters Monday. "With the liberation of Iraq," she added, "President Bush and Prime Minister Blair have asked that the United Nations sanctions be lifted so that more (humanitarian) aid can flow into Iraq."
Meanwhile, world oil markets reacted coolly to the news. May crude on the New York Mercantile Exchange settled 49 cents higher Monday at $28.63 per barrel while the International Petroleum Exchange in London settled 25 cents higher at $25 per barrel.
Much of the modest bullish sentiment could be traced to the expectation that OPEC will agree to reduce its exports when it meets in Vienna later this month. The cuts could mean less oil on the market as the United States heads into the summer driving season.
While traders expect Iraqi oil to resume flowing sometime in the near future, there has been no estimated date for that happy event. Although Iraq's oil sector is in reasonably good physical shape, there are significant barriers to a resumption of exports that can be used to finance the massive rebuilding effort getting under way in the occupied country.
Since there is no government bureaucracy in Baghdad, there are legal questions as to exactly who owns Iraq's oil and who has the authority to sell it. In addition, a new Iraqi government will have to decide on its future relationship with OPEC and whether or not to honor the contracts signed by the old regime with companies such as LUKoil.
