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12 Feb, 2008 02:55

Moscow cancels $US 12 BLN Iraqi debt

Most of Iraq’s Soviet-era debt has been written off by Russia, allowing the country to capitalise on the war-torn state’s massive rebuilding programme. The $US 12 billion dollar write-off was announced as the Russian and Iraqi foreign ministers met to dis

“In total Russia will write off a debt which comes to $US 12.9 billion and will be restructured in the course of seventeen years. The whole amount totals around 93%,” said Russia’s Finance Minister, Aleksey Kudrin.

During a meeting between Sergey Lavrov and Hoshiyar Zibari, the importance of Iraq to Russia became clear.

“The memorandum we've signed will open doors for Russia for fully-fledged participation in all projects and tenders to be held in Iraq,” Hoshiyar Zibari confirmed.

The agreement will allow Russia to boost business on Iraqi territory, something that Russia is very interested in doing.

“We count on launching promising joint-projects in the oil and gas and electric power sectors.We are very interested in this and we want to give assistance to friendly Iraq,” said Sergey Lavrov.

Russian-Iraqi relations background

Over the past half-century Russia-Iraq relations have seen their highs and lows.

As a major political ally and a trading partner of Moscow in the 70s and 80s, Baghdad used to buy Soviet weapons, while at the same time exporting oil.

The 90s brought a difference. Co-operation between the countries almost ground to a halt after Russia denounced the Iraqi occupation of Kuwait and supported international sanctions against Baghdad.

Following years of economic blockades on Iraq, it wasn't until 1997 that Russia renewed trade links with Iraq as part of the oil-for-food programme.

However, the turnover was much lower than before, hardly reaching a tenth of the pre-sanctions period.

Years of war waged by Saddam Hussein and an economy weakened by the armed conflicts resulted in massive debts for Iraq.

After years of stagnation Russian business is now resuming its ties with Baghdad. Oil companies have been among the first to come back.

Although political instability, lack of strong legislation and a constant threat to security don’t make Iraq the best place for doing business, Russian entrepreneurs say the first steps have been made and this progress, however small, should not be lost.