Oil companies from around the world are maneuvering for the multibillion-dollar bonanza that would follow the ousting of Saddam Hussein.

Russia is so concerned that it has been holding secretive talks with the Iraqi opposition to shore up its economic interests in the country which still owes Moscow $7bn dollars from Soviet times.

With the second-biggest reserves in the world, Iraq's underdeveloped oilfields have become a key negotiating chip and a backdrop to talks between the US and the other permanent members of the UN Security Council – all of which have major economic stakes in regime change in Iraq.

It has also given fuel to critics of America's war plans who say the desire for regime change is at least partly driven by economics.

Oil industry experts say there is growing concern that America would dominate the Iraqi oil industry after Saddam. As a result, a number of oil companies have reportedly held talks with the Iraqi opposition to ensure they are involved in any future deals.

The Independent has learnt that the Russian government – which is friendly towards Iraq – recently dispatched a diplomat to hold talks with a senior official from the Iraqi National Congress (INC), the US-backed opposition umbrella group. At that meeting in Washington on 29 August – the first for seven years – the diplomat expressed worries that Russia would be kept out of the oil markets by the US.

James Woolsey, a former director of the CIA and a commentator on the relationship between oil and global security, told The Washington Post: "It's pretty straightforward. France and Russia have oil companies and interests in Iraq. They should be told that if they are of assistance in moving Iraq toward decent government we'll do the best we can to ensure the new government and American companies work closely with them.

"If they throw in their lot with Saddam it will be difficult to the point of impossible to persuade the new Iraqi government to work with them." Iraq has confirmed oil reserves of 112 billion barrels, second only to Saudi Arabia, with perhaps double that in undiscovered reserves. With sanctions in place, the current production is just 2.8 million barrels a day – a capacity it struggles to reach because of deteriorating equipment.

Under the United Nations' oil-for-food program, it exports about one million barrels a day. Since 1998, two subsidiaries of Houston-based Halliburton, the company previously headed by the US Vice-President, Dick Cheney, have done $24m (£15.3m) of business to repair Iraqi oil pipelines under the UN program

Experts say that given sufficient further foreign investment, Iraq could be producing a total of 6 million barrels a day within five years, making it the world's third biggest producer behind Russia and Saudi Arabia.

But which companies will benefit from these rich pickings? Since the end of the Gulf War, companies from more than a dozen nations – including Britain – have had discussions with Iraq about developing oilfields. In 1997, Russia's Lukoil negotiated a $4bn deal to develop the West Qurna oilfield while last year another Russian company, Slavneft, signed a $42m (£27m) deal to drill in Tuba.

The French TotalFinaElf company has negotiated the rights for the vast Majnoon oilfield, which is near the Iranian border.

It is unclear whether such deals would be honored by a post-Saddam Iraqi government. Faisal Qaragholi, an official with the INC, said that all such deals would be reviewed. "If the deal [helps] the Iraqi people then it will be carried on, if it does not, it will be renegotiated," he said.

The INC's chairman, Ahmed Chalabi, believes the US should head a consortium to develop Iraq's oil. "American companies will have a big shot at Iraqi oil," he said.

Such comments horrify the Russian government, which as a major oil exporter has much to lose should America assume a dominant position in Iraq's oil industry.

Thane Gustafson, senior director with the Cambridge Energy Associates (Cera) consultants, said the issue was almost certainly a factor in Russia's negotiations with the US about a new UN resolution over weapons inspectors. "Oil is bound to be on [President Vladimir] Putin's mind because of the importance of oil exports," he said. "It's bound to worry Putin. He would probably prefer things pretty much as they are now."

Russia's concern led it to dispatch Andrew Kroshkin, a diplomat, to hold talks with the INC's Washington director, Entifadh Qanbar. Mr Qanbar said that during the two-hour meeting at the INC office, Mr Kroshkin said the Iraq policy of Russia – which has estimated debts of $100bn (£64m) – was "100 per made by money".

"He told me that he had been told that if the Americans overthrow Iraq they will not let the Russians do business in Iraq," he said. "We have seen this in the Balkans. He wanted to say that Russia's dealings with Iraq are based on historical and economic relations, not on relations with Saddam."

The importance of Iraqi oil is also to be discussed next week at a US-Russian energy summit in Houston at which more than 100 US and Russian energy companies are expected to be represented.

In this environment, it is likely that most leading oil companies are actively trying to position themselves to operate in Iraq if Saddam is overthrown. The US oil giants ExxonMobil and ChevronTexaco both refused to say whether they had been holding talks with Iraqi opposition. Both said, however, that they would be interested in operating in Iraq if sanctions permitted.

A spokesman for Royal Dutch Shell, the British-Dutch company which held discussions with President Saddam about developing the Ratawi oilfield several years ago, said it had not approached the INC. But if sanctions were lifted, the company would be interested in dealing with Iraq, he said.

James Lucier, an oil analyst with Prudential Securities, said: "There's no real upside for American oil companies to take a very aggressive stance at this stage. There'll be plenty of time in the future."

© 2002 lndependent Digital (UK) Ltd

###