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Money talks in relations with Iraq

With a large trade debt outstanding from Iraq and lucrative oil contracts there hanging fire, Russia’s reluctance to toe the US line is understandable, especially in the context of a broader desire to re-establish regional ties.

THE SHOWDOWN BETWEEN Europe and the US over Iraq has put Russian president Vladimir Putin in a delicate position. He has tried to balance the need to remain on good terms with the world's only superpower with a simultaneous bolstering of Moscow's traditional strong relations with the countries of the Middle East, especially Iraq.

When forced to choose between these strategies, an increasingly confident Russia followed the money. Relations between Russia and US have improved greatly since the September 11 terrorist attacks but goodwill doesn't pay the bills.

Russia remains one of Iraq's most important trade partners, with ties stretching back to Soviet days, when the USSR was Iraq's biggest arms supplier. Iraq's military is almost entirely armed with Russian hardware and Russian trading companies dominated Iraq's legal oil exports under the UN's oil-for-food programme, handling a third of the total. (Meanwhile, French bank BNP Paribas has exclusive rights to handle all the funds connected with the trade, despite Iraq's dislike of this arrangement and its faltering attempts to diversify its financial arrangements.)

Modern Russia's first president, Boris Yeltsin, put most of his foreign relations energy into establishing ties with the west, and the US in particular.

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