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Topic: Energy
Region: Middle East
Type: Articles
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Ruslan Mamedov

MSc in International Relations, Program Coordinator (MENA) at the Russian International Affairs Councill

Russian energy companies in Iraq have maintained their presence in the country regardless of the political forces in power, working within the current domestic political situation. Prior to the Syrian campaign of 2015, which was assumed to mark Russia’s active return to the Middle East, the Government of Iraq had already signed large contracts with LUKOIL, Gazprom Neft and Bashneft. Rosneft made its dynamic and massive entry into Iraq following the improvement of the security in the country and on the back of Russia’s growing political capital in the Middle East.

Russian capital is becoming very important for Iraq. According to Russian officials, Russian companies may invest up to USD 45 billion in the country by 2035.

Key Russian private companies and state corporations are present in Iraq, and their top managers are part of Russia’s ruling elite. The latter circumstance determines the importance of Iraq projects for Russian decision-makers. In Iraq itself, Russia engages with both Erbil and Baghdad. If a conflict arises, Russian companies display flexibility and succeed in retaining their positions. Overall, Russian investment in Iraq energy projects demonstrates the strategic nature of structuring Russia’s Iraq policies and their growing interdependence.


Russian energy companies in Iraq have maintained their presence in the country regardless of the political forces in power, working within the current domestic political situation. Prior to the Syrian campaign of 2015, which was assumed to mark Russia’s active return to the Middle East, the Government of Iraq had already signed large contracts with LUKOIL, Gazprom Neft and Bashneft. Rosneft made its dynamic and massive entry into Iraq following the improvement of the security in the country and on the back of Russia’s growing political capital in the Middle East.

Sanctions against Iran as a Stimulus for Iraq

Sanctions against Iran imposed once again following the withdrawal of the United States from the Joint Comprehensive Plan of Action (JCPOA) were a crucial factor in the importance of the Iraqi oil market. With Iran hit by sanctions, the need for oil supplies from Iraq emerged to prevent a shortage on the global oil market. When the United States imposed the sanctions against Iran, it assured the West that the market supply of oil and the stability of oil prices would not be affected.

To avoid problems on the global oil market, Washington had to involve virtually all the significant reserve capacities of the energy world, which involved negotiating with Saudi Arabia and “releasing” Kirkuk oil.

Let us not forget that the emergence and expansion of ISIS (a terrorist organization banned in Russia) forced the Iraqi military to abandon Kirkuk in 2014, and the area passed under the control of the Kurdish Peshmerga units. From that moment on, Kirkuk oil was sold via the Kurdistan Regional Government, rather than via Iraq’s national oil company, the State Organization for Marketing of Oil (SOMO).

On September 25, 2017, the Kurdistan Regional Government held a referendum on independence that was not recognized by the federal government. Relations between Erbil and Baghdad soured. Consequently, three days after the referendum, newly strengthened government forces started to advance on the Kurdish Peshmerga and took control of several strategically essential districts, including the oil-rich Kirkuk. These events resulted in a freeze of oil deliveries from the Kirkuk oil fields.

Hoping to normalize relations between Baghdad and Erbil and bring Kirkuk oil back to the market, the United States started to put pressure on both parties, which were locked in conflict following the referendum. It was also crucial for Moscow, which also acted as a party aiding talks between the two sides. By that time, the Baghdad government had already named Rosneft among the “illegally” operating companies, since it had signed its contract with the Kurdistan Region. Normalizing relations between Baghdad and Kurds would lead the parties to an arrangement concerning Rosneft’s presence in Iraq.

Thus, the United States and Russia benefited from working relations being established between Erbil and Baghdad, which soon resumed deliveries of Kirkuk oil.

Oil Companies Return to Iraq

LUKOIL was the first to return to post-Saddam Iraq. The company had maintained a constant interest in projects inside the country, both when it was under sanctions (1990–2003) and after the Saddam Hussein regime was overthrown. On December 12, 2009, LUKOIL, in a consortium with Norway’s Statoil, won the tender to develop West Qurna-2, one of the world’s largest oil fields.

Apparently, despite the remaining risks of working in Iraq, LUKOIL had a long-term strategy. In 2012, the company expanded its activities when it acquired the rights to explore and subsequently develop Block 10 of the field in conjunction with Japan's INPEX CORPORATION. In 2017, LUKOIL and INPEX successfully completed the testing of Eridu 1, the first Block 10 appraisal well.

LUKOIL is steadily improving its indicators in Iraq. Currently, the company strives to increase production in West Qurna-2 from 400,000 barrels per day today to 480,000 in 2020. The government and the company are updating the contractual framework of LUKOIL’s work in Iraq on a mutually beneficial basis. For instance, in 2013, the contract was prolonged until 2035. LUKOIL’s 2018 oil field development plan entails reaching the production level of 800,000 barrels per day in 2025.

In January 2010, Russia’s Gazprom Neft, in a consortium with Kogas (South Korea), Petronas (Malaysia) and TPAO (Turkey), won a tender to operate the large Badra oil field. Gazprom Neft also has oil fields in the Kurdistan Region. The company operates two projects in the Kurdistan Region, Shakal and Garmian. The Garmian block also includes the development of the Sarqala field, where Gazprom Neft plans to increase production.

Upon receiving the assets of Bashneft, Rosneft gained a significant share of the Iraqi market. Bashneft had been developing Block 12 in the governorates of Muthanna and Najaf. Nonetheless, as Russia’s political interest in the region grew, the positions of Russian energy companies, including Rosneft, became stronger. It was against this background that in 2017, at the 21st St. Petersburg International Economic Forum, Rosneft concluded an investment contract with the government of the Kurdistan Region (open sources estimate this contract to be worth USD 4 billion).

In addition to the fields in the oil-rich Kirkuk, which was controlled by the Kurds at the time, Rosneft also gained access to significant oil infrastructure in the Kurdistan Region. The key was the acquisition by Rosneft of 60 per cent of the Kirkuk–Ceyhan Oil Pipeline, thus becoming its operator. The pipeline had already been modernized, and its capacity increased from 700,000 barrels per day to 950,000 by the time of the acquisition.

In 2018, Rosneft announced it was launching geological exploration works at the Batil, Zawita, Qasrok, Harir-Bejil and Darato oil fields in the Kurdistan Region. The Russian company owns 80 per cent of each field. Rosneft reported that the cost of entering these five projects could be up to USD 400 million (company press release dated October 18, 2017).

Russia–Iraq Relations: Flexible, but Persistent

In October 2019, Minister of Foreign Affairs of the Russian Federation Sergey Lavrov visited Iraq for the first time in five years. He was joined in his trip to Baghdad by Chairman of Soyuzneftegaz Board of Directors Yuri Shafranik, Chairman of the Management Board of Gazprom Neft Alexander Dyukov and representatives of Rosneft and Technopromexport. However, no announcements of significant contracts were made.

This could be explained by Russia’s tradition of not advertising its business projects and contracts in Iraq.

This approach surprises some Iraqis, who would like to see a more unequivocal stance on the part of Moscow towards their country. However, at the same time, they recognize that this is useful for advancing, signing and implementing agreements with the government of Iraq. Several memorandums of cooperation were signed as a result of Lavrov's visit to Iraq that could serve as a basis for further increasing Russia’s presence in the country.

Russian capital is becoming very important for Iraq. According to Russian officials, Russian companies may invest up to USD 45 billion in the country by 2035.

Key Russian private companies and state corporations are present in Iraq, and their top managers are part of Russia’s ruling elite. The latter circumstance determines the importance of Iraq projects for Russian decision-makers. In Iraq itself, Russia engages with both Erbil and Baghdad. If a conflict arises, Russian companies display flexibility and succeed in retaining their positions. Overall, Russian investment in Iraq energy projects demonstrates the strategic nature of structuring Russia’s Iraq policies and their growing interdependence.

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