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Baghdad says US and UK could share Iraqi oil

MOSCOW Iraqi Trade Minister Mohammed Mahdi Saleh told Russian reporters in Baghdad yesterday that Baghdad would allow US and British companies onto its oil market if war is avoided, ITAR-TASS reported.

At the moment, Saleh was quoted as saying in Baghdad, Iraq "does not support any ties (in the oil industry) with either Washington or London".

The minister said: "But if they end their hostile attitude toward Iraq, then there will be no obstacles for us resuming normal relations with them."

Trade relations between Iraq and the West must be based "on mutual respect," said Saleh.

"If that happens, the situation around Iraq will change dramatically," he added.

Iraq possesses the world's second-largest oil reserves after Saudi Arabia.

US Secretary of State Colin Powell has dismissed speculation that Washington is bent on controlling Iraq's oil reserves, saying the oil would be held in a trust for the Iraqi people if the United States attacks Iraq.

The French trade publication Petrostrategies reported in an issue due to be published that the US administration was currently divided over how to manage Iraq's oil sector should Iraqi President Saddam Hussein be overthrown.

The US State Department would reportedly prefer the Iraqi oil industry to remain public.

But the Pentagon, backed by the White House, has argued that the United States must adopt a more hands-on approach to controlling the Iraqi oil and energy industry by supervising its privatisation, Petrostrategies said.

"Under this approach, US companies would dominate the privatisation process, leaving "consolation prizes to the Russians, a respectable portion to the British and, if possible, nothing else to European firms," the magazine said.

French oil giant TotalFinaElf is thought to currently have the biggest foreign interests in the Iraqi oil sector.

Russia for its part also has massive oil investments in Iraq that have been all but frozen because of tough UN sanctions, but which it fears losing to Western firms in case the regime of Saddam Hussein - which has guaranteed these investments - is toppled.

Moscow's second fear is that Western control of Iraqi oil fields will lead to a flooding of the global crude market and a drastic drop in prices on a commodity that accounts for most Russian export revenues.

But Russia's oil relations with Iraq were strained in recent months by reports that Russian oil producer LUKoil had established contact with opposition figures as well as US officials in a bid to secure its investments in case Saddam falls. LUKoil's contracts are now up in the air following an announcement by Baghdad that it had voided its relation with the company.