Iraq scraps $4.2 billion Russian arms deal, cites graft

BAGHDAD Sat Nov 10, 2012 2:55pm GMT

BAGHDAD (Reuters) - The Iraqi government said on Saturday it had cancelled a $4.2 billion deal to buy military jets, helicopters and missiles from Russia, citing possible corruption in the contract.

In a confusing exchange, the announcement by Prime Minister Nuri al-Maliki's office was immediately contradicted by the acting defence minister who denied the corruption charges, claiming the deals were still valid.

U.S. military hardware remains key for Iraq's armed forces, but security analysts said the Russian deal had appeared to open a way for Maliki to resist U.S. political pressure by diversifying his arms suppliers.

The Russian deal was agreed just as Washington warned the Iraqi Shi'ite leader to curb Iranian flights ferrying weapons through Iraqi airspace to aid Syrian President Bashar al-Assad in his fight against a revolt there.

Maliki's media adviser Ali al-Moussawi said the decision to renegotiate the agreements was taken after the prime minister was informed about possible wrongdoing in the contract.

"Our need for weapons still stands so we will renegotiate new contracts," Moussawi said. "This is a precautionary measure because of suspected corruption."

But acting Defence Minister Sadoon al-Dulaimi, who negotiated with the Russians, dismissed the corruption charges.

"We have not transferred even one dinar, there was no agent, no contract was signed. These were just technical and financial offers," he told reporters in Baghdad.

Russian arms exporter Rosoboronexport declined to comment. Russia's Interfax news agency also said the Russian embassy in Iraq said it had not been informed the deal had been scrapped.

Russia's daily Kommersant said the contract, announced in October, envisaged the delivery of 42 combined short- to medium- range surface-to-air missile and anti-aircraft artillery weapon systems Pantsir-S1.

It also said Russia could be selling Baghdad MiG-29M/M2 aircraft as well armoured vehicles. Previous news reports had detailed the sale of attack helicopters.

News of the cancellation of the deal came at a time when Russia has been entangled in a series of corruption scandals involving its defence ministry and its space ministry.

On Friday, President Vladimir Putin fired the chief of his military staff, days after sacking the defence minister over a corruption and sleaze scandal..

The deals would have made Russia the second largest military supplier to Iraq after the United States, which has sold Baghdad billions of dollars in arms including F-16 fighters and tanks since the 2003 invasion that ousted Saddam Hussein.

Maliki's Russian agreements fit into the wider context of his juggling interests over the war against Syria's Assad. Iran and Russia support Assad, while the rebels fighting him are backed by Saudi Arabia, Turkey and Western powers.

Maliki relies on the United States for military aid, but also depends on Iranian influence at home to keep control over Shi'ite allies in his fragile cross-sectarian government among Shi'ites, Sunnis and Kurds.

(Additional reporting by Lidia Kelly in Moscow; writing by Patrick Markey)

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