MOSCOW FEARS IRAQ WON'T PAY BACK BIG DEBT

Soviet officials fear no matter how successful Iraq is in obtaining new oil resources in the Persian Gulf area, Baghdad won't pay back to the U.S.S.R. and formerly Communist eastern European nations the huge debt it owes them, largely for arms. The Moscow News newspaper said, "Iraq's debts after 8 years of using Soviet weapons against Iran amount to more than $80 billion. For arms supplies alone, Baghdad owes Poland nearly $1 billion.

Sept. 17, 1990

5 min read

The Moscow News newspaper said, "Iraq's debts after 8 years of using Soviet weapons against Iran amount to more than $80 billion. For arms supplies alone, Baghdad owes Poland nearly $1 billion.

"As we see it, Saddam Hussein, again by means of Soviet weapons, found a way to settle accounts-to seize by force first Kuwait's oil and then the entire Arab world's oil. But we won't be paid at that time either."

Pravda reported Moscow this year signed a protocol calling for Iraq to pay the Soviet Union $1.6 billion in oil for "trade operations" as well as $350 million in hard currency, for the total equivalent of about 10.5 million tons of oil. "However, we have been able to obtain only 6.5 million tons of oil and $46 million in currency," Pravda said.

Last year, Iraq exported 11.9 million tons of crude and nearly 2,000 tons of petroleum products valued at nearly 973 million rubles to the U.S.S.R. Much of the "imported" Iraqi oil was reexported by the Soviets.

Pravda said in accordance with the United Nations Security Council's sanctions, the U.S.S.R. has conducted .,absolutely no commercial activity" with Iraq since Aug. 6. Two Soviet cargo ships en route to Iraq were ordered back to the U.S.S.R.

Even so, about 6,500 Soviet citizens, 3,000 Poles, 500 Czechs, and 10,000 Yugoslavs, Romanians, Chinese, Japanese, and Brazilians were still working in Iraq at the end of August.

LOSSES AND GAINS

Izvestia said the U.S.S.R. will lose $800 million during 1990 in the form of current payments and a shortfall in Iraqi oil deliveries slated for reexport to Yugoslavia, Bulgaria, Romania, and India. In addition, an expected $115 million won't be received by Moscow from Kuwait.

Meanwhile, Soviet commentators continue to speculate about how much added revenue the U.S.S.R. will obtain as a result of higher oil prices caused by the Persian Gulf crisis.

The Moscow newspaper Trud didn't dispute western estimates that the Soviet Union could receive a $20 billion windfall if 1991 crude prices average $28/bbl. That might be enough to change what could have been a record negative 1990 U.S.S.R. foreign trade balance into a surplus next year.

Trud deplored assertions that Moscow did nothing to prevent Iraq's aggression against Kuwait and may have supported it because the U.S.S.R. could profit greatly from the conflict. Such a view, if widely accepted in the U.S., would seriously harm Soviet-American relations, Trud declared.

In another article published this month, Moscow News said, "The West believes Soviet oil export revenues will grow fabulously due to Iraq's annexation of Kuwait and the jump in world oil prices. Indeed, revenues could grow, but not as much as was expected.

"If our oil exports don't fall substantially because of lower crude production and domestic refined product shortages, Soviet foreign currency revenues should increase by billions of dollars. Which, of course, would be fine."

AN EYE ON CUBA

Cuba's recently decreed draconian measures to cut oil consumption go far beyond steps required by past or imminent reductions in crude and product deliveries by the U.S.S.R., according to the Soviet press.

Moscow said Soviet 1990 oil exports to Cuba through August were 730,000 bbl more than in the same 1989 period. It added that crude deliveries to Cuba were sufficient to guarantee operation of the nation's refineries at full capacity.

The newspaper Izvestia suggested that Havana, in raising the specter of "petroleum strangulation," has overreacted, possibly in anticipation of future difficulties regarding Soviet oil deliveries. Izvestia said Cuba has decided not to place in operation the first 60,000 b/d phase of a 120,000 b/d refinery being built at Cienfuegos on the island's south coast.

Starting in October, Cuban gasoline rations for private cars will be about 21 gal/month-a 30% cut-and residential electrical power use will be reduced by 10%.

Production is being halted at a nickel plant in Punta Gorda, where 75% of output is supplied to the U.S.S.R. The oil refinery and nickel plant were built with Soviet technical assistance, including about 370 technicians from the U.S.S.R.

No mention was made regarding stoppage of construction on Cuba's first offshore drilling/production platform in shallow waters of Cardenas Bay, about 80 miles east of Havana. Offshore Cardenas Bay production isn't expected this year.

Havana officials predict Soviet oil deliveries in 1990 will be about 14.6 million bbl short of contract volume.

Izvestia reported Cubans waiting in long lines for gasoline are "reproachful" toward the U.S.S.R. But the newspaper noted that Cuba owes the Soviet Union 332,000 tons of sugar and 1,500 tons of nickel this year.

Moscow said that in the past Cuba regularly reexported Soviet oil to obtain hard currencies. It said no such reexports have been observed this year.

Izvestia said if reexport of Soviet oil is still taking place, it would do much to explain Cuba's purported oil shortage. It said the Castro government may be hoarding oil for "future dark days."

Cuba's domestic crude production last year was less than 15,000 b/d, down from a peak of nearly 19,000 b/d in 1986. According to official Soviet data, the U.S.S.R. sold Cuba 25.7 million bbl of crude and more than 14 million bbl of refined products last year.