Now, the question is what a war will do to Alekperov's Iraq project. In one scenario, Lukoil's contract with Iraq could be challenged if U.S. military action leads to a regime change--a new Iraqi government could well decide to give oil development rights to bigger, richer Western oil majors. Already, one Iraqi opposition group is saying a new government would reexamine all contracts signed by Saddam. "He signed on behalf of himself, not Iraq. They will be restudied and renegotiated," says Faisal Qaragholi, operations officer of the Iraqi National Congress, an opposition group that has support in Congress and the Pentagon.
There's a rosier view to take, though. Russia's oil czars are telling President Vladimir V. Putin that they want assurances from the U.S. that Russian contracts with Iraq will not be torn up. If Washington cuts such a deal in return for Putin's backing for U.S. action and preserves Lukoil's Iraqi field, then Alekperov will be one of the immediate beneficiaries of the war. "Bringing West Qurna on line will give a [big] boost to Lukoil's profits," says analyst Jonathan Stern, of London's Royal Institute of International Affairs.
So what's an oil czar to do while he waits for the winds of war to blow? In Alekperov's case, he continues to court the West. That's a way to drum up business and get in good with U.S. policymakers, who might look kindly on a Russian company's plight in Iraq. So on Oct. 2, the Lukoil CEO pitched an idea to a U.S.-Russia energy summit in Houston. His plan: build a $1.5 billion pipeline to the Arctic port of Murmansk. That way Russian oil could travel directly to the U.S. on tankers. "It's twice as short as the route from the Persian Gulf," he says. He's also looking for international partners to develop Qurna.
Saddam's government, meanwhile, is dangling before Putin the prospect of a $40 billion economic cooperation pact--a deal that would clearly benefit Lukoil--with the hope that Russia blocks the U.S. in the U.N. But Russian oil companies, Lukoil included, are telling Putin to stay friendly with the West.
That's probably wise: Since Putin moved to support the U.S. in the wake of the September 11 attacks, Lukoil's share price has climbed 71%. But even here, Lukoil and the other Russian oil majors run risks. When Iraqi oil comes fully onstream, Russia's new importance in the oil market will be diminished. Iraqi officials say production can be upped to 6 million barrels per day from about 2 million now. Russia produces 7.8 million barrels per day, but exports just 3.5 million because pipelines are gridlocked. It will take three more years for new pipelines to kick in. And while it costs Lukoil around $9 to drill and export a barrel of oil, it costs the Iraqis just $2 to $3, estimates the International Energy Agency. "An extra 4 million bpd from Iraq is going to be a problem. That's a lot of oil," says Michael Wittner, the agency's principal oil supply analyst.
Alekperov and his fellow barons hope billions of Western investment dollars will flow to Russian projects before Iraq has time to undercut Russia's position. "There'll always be demand for Russian oil," says Alekperov. But how much demand? The answer won't come until Baghdad has a new ruler. By Catherine Belton in Moscow