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Key to France, Russia Position on Iraq: Cash

Is the opposition led by France and Russia to U.S. military action in Iraq motivated by love of peace or love of money? If you say money, you’re on the right track.

Should United Nations sanctions against Iraq be lifted, Russian and French companies stand to profit from billions of dollars’ worth of contracts to generate 5 million barrels a day of new oil capacity.

Yale economist William Nordhaus maintains that these agreements “were negotiated on extremely favorable terms” by the Iraqis “with an eye to gaining Security Council vetoes” in return.

Money, of course, isn’t the only thing driving Russia and France. Geopolitical influence is also an important factor; both nations regard the Middle East as firmly within their sphere of influence.

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But the bottom line is, well, the bottom line. Russia, for one, is owed more than $9 billion for weapons it supplied to the Iraqi government years ago. And Moscow would like nothing more than to pump Iraqi oil to repay itself that debt. For its part, France has its own array of business links with Iraq. Telecommunications firm Alcatel, for example, built the Iraqi telephone system after the 1991 Gulf War and clearly would like the job of repairing and expanding the network in the future.

A U.S.-led war threatens all that, however -- or at least it does in the minds of French and Russian officials.

Under the scenarios being discussed, a U.S.-controlled government could conceivably run Iraq for as long as two years after the bombing stops. France and Russia, it seems, fear and loathe the prospect of the U.S. exerting such decision-making power in postwar Iraq because they could be cut out of the business opportunities that rise from the ruins of Baghdad. Meanwhile, the fate of their oil contracts, inked as they were with Saddam Hussein’s regime, would be in doubt.

But such a view is, in many ways, misguided.

The scope of the reconstruction to be tackled after Hussein is ousted is so large, even an economic powerhouse such as the U.S. can’t do it alone. The Baker Institute at Rice University foresees as much as $100 billion of work in the next three to five years in Iraq because basic water, electric power and other services have been devastated over two decades by the war with Iran, the Persian Gulf War and simple neglect. A fresh round of missile attacks by U.S. and British forces obviously would devastate the country’s infrastructure all the more.

With that much rebuilding to accomplish, the chance of an American monopoly is virtually nil. Sure, an engineering firm such as Black & Veatch Inc. of Kansas City, Mo., may become a leading bidder for developing water systems in Iraq. But it’s likely to be given a run for its money by French firms Suez and Vivendi Environnement. Nobody is going to have a lock on all the contracts.

Deals for putting in roads and bridges, hospitals and schools could go immediately to U.S. engineering companies Fluor Corp., Parsons Corp. and AECom Inc. Those companies already are in the area, maintaining U.S. military camps and other facilities in Kuwait. But there also is an urgent need for $20 billion worth of electrical power plants to be erected across California-size Iraq. Siemens of Germany and ABB Group of Switzerland will be among the leading bidders for such projects.

Iraq’s main seaport, Basra, has been blocked for almost 20 years. Port builders from the Netherlands, Denmark and Japan are bound to be recruited to reopen the waterway as an aid to restoring Iraq’s non-oil economy, which used to provide the bulk of its exports.

For the $2 billion worth of projects to build a cellular telecommunications system for Iraq, Motorola Inc. is likely to be a bidder. But it will be battling for contracts with Sweden’s L.M. Ericsson, Finland’s Nokia and, of course, Alcatel.

Even the politically motivated oil contracts that Hussein’s government signed with Russia and France wouldn’t necessarily be lost. Rather, these accords are probably going to be examined in “a U.N.-mandated legal framework for vetting pre-hostility exploration agreements,” according to a new report, “Guiding Principles for U.S. Post-Conflict Policy in Iraq,” by the Baker Institute and the Council on Foreign Relations.

Certainly, there is still much to be sorted out before any rebuilding can begin. How, for instance, “will people be paid for work in Iraq?” asks Sanford Millar, a Los Angeles-based international lawyer with clients in Saudi Arabia and Lebanon. “Will the currency be dollars and euros or a new Iraqi currency?” With Iraq’s oil revenue totaling only about $10 billion a year for the foreseeable future, the World Bank and other institutions undoubtedly are going to be called on to help foot the bill.

But in the end, this much is clear: The U.S. may be having trouble winning enough votes to prosecute the war. It won’t have any difficulty, however, finding other nations eager to clean up the mess.

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James Flanigan can be reached at jim.flanigan@ latimes.com.


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