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Moscow anger as Iraq breaks oil deal
By CNN Moscow Bureau Chief Jill Dougherty
MOSCOW, Russia (CNN) -- Russian has described the decision by Iraq to cancel a major oil contract as "illegal" and as "not corresponding to the friendly nature of relations between Russia and Iraq." On Thursday, Iraq informed Lukoil -- Russia's largest oil company -- that it was cancelling a 1997 contract worth a reported $3.8 billion. The contract was with Lukoil and its consortium of two other Russian oil companies to develop the West Qurna-2 oil field. Iraq's ambassador to Moscow, Abbas Khalaf, said Lukoil had not carried out its responsibilities to develop the field. "It just signed the contract and left," he told reporters. The cancellation applies only to Lukoil, he said, and Iraq continues to count on other Russian oil companies to develop its oil and gas resources. Lukoil, however, said Iraq's decision was based on politics, not economics, and that Baghdad is trying to punish Russia for supporting the U.N. resolution on weapons inspections in Iraq. Lukoil's vice president, Leonid Fedun, said his company was considering legal action. A Russian government source quoted by Interfax news agency said "If Iraq takes such a decision, then one of the major reasons for Russia to support Iraq in the current international situation disappears. "By himself, Saddam Hussein is not interesting enough for Russia to support him in any situation." Russia has major economic interests in Iraq. Baghdad owes it almost $8 billion in Soviet-era debt and Russian oil companies were hoping to eventually cash in on lucrative contracts to develop Russia's oil infrastructure. The fallout between Moscow and Baghdad comes as more U.N. weapons inspectors are due in Iraq. (Story) The United Nations is stepping up its searches for signs of weapons of mass destruction. Twenty inspectors are due to arrive in Baghdad from Cyprus on Sunday where they will add to the growing number of inspectors, estimated around 100.
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