Iraqi President Welcomes Russian Decision to Write Off Debt

Iraqi President Jalal Talabani welcomed an expected Russian decision to write off 91% of Iraq's estimated $13 billion debt on Friday, saying it would be a "historic turning point" in relations between the two countries.

A diplomat at the Iraqi Embassy in Moscow said Thursday that an agreement for the reduction of the debt would be signed during a visit starting Sunday by Iraqi Foreign Minister Hoshyar Zebari. A Russian Finance Ministry official confirmed that the signing of a debt-restructuring deal was planned.

Talabani, Deputy Prime Minister Barham Saleh and other Iraqi officials met with a delegation led by the Russian ambassador to Iraq Friday in Baghdad to discuss expanding and developing friendly ties between the two countries in all fields.

"It is expected that a new agreement will be signed to reduce the Iraqi debt by a proportion of 91%," Talabani's office said in a statement. "The two sides have agreed that this will be a historic turning point in relations between the two countries."

The Iraqi diplomat said the deal was being signed under a 2004 agreement in which Russia and other creditor nations agreed to write off 80% of Iraq's debts.

The diplomat and the Russian official refused to discuss figures. Both spoke on condition of anonymity, citing policy.

At the time of the 2004 agreement, President Vladimir Putin said Russia would go further by forgiving some 90% of what Iraq owed, reducing its debt to Moscow to about $1 billion.

The decision to write off Iraqi debt was seen in part as an effort to improve Russian companies' chances of winning contracts in Iraq in the wake of the U.S.-led invasion it strongly opposed.

But efforts by Russian oil company OAO Lukoil (LKOH.RS) to regain a role in developing the giant West Qurna field have not produced a deal, and talks on the debt reduction have dragged out.

The Iraqi diplomat said agreement was reached in December. The Iraqi diplomat and the Russian official refused to comment on whether the issues were linked.

The diplomat said Zebari would also sign a memorandum of understanding aimed at boosting trade, economic, scientific and cultural cooperation with Russia.

Copyright (c) 2008 Dow Jones & Company, Inc.


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