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Envoy: Moscow, Baghdad to Sign $40B Deal

It's not quite 1939 all over again, but a $40 billion economic partnership between Russia and Iraq has the U.S. worried as it's perched on the verge of a war against Saddam Hussein.

News of the cooperation plan between Baghdad and Moscow came Saturday from the Iraqi ambassador, and has Washington scrambling to figure out what this means for its potential assault on Iraq, one of the countries it has labeled a terrorist state.

"We're confident that Russia understands its obligations under United Nations Security Council resolutions, and that they'll abide by them," White House spokeswoman Claire Buchan said.

The statement by Ambassador Abbas Khalaf came amid indications that Russia, despite its strong support for the post-Sept. 11 antiterrorism coalition, is maintaining or improving ties with Iran and North Korea, which together with Iraq are the countries President Bush has labeled the "axis of evil."

Washington is trying to rally support for a possible invasion of Iraq, which the United States accuses of supporting terrorism and of rebuilding its banned weapons-of-mass-destruction program, but many U.S. allies are resisting the push. Russia, a longtime ally of Iraq, has forcefully warned against a possible U.S. invasion.

And German and U.S. officials confirmed Saturday that the U.S. ambassador to Berlin, Dan Coats, had questioned German officials about Chancellor Gerhard Schroeder's opposition to attacking Iraq, an indication that Schroeder has irked Washington.

Many opponents argue that an invasion cannot be justified without firm proof that the regime of Iraqi leader Saddam Hussein is developing nuclear, chemical and biological weapons.

The chief United Nations weapons inspector, Hans Blix, told The Associated Press that he can't say with certainty whether Iraq has such weapons.

"If we knew -- if we had real evidence that they have weapons of mass destruction -- we would bring it to the Security Council," he said.

Blix spoke while waiting for Iraq's response to a letter from Secretary-General Kofi Annan urging the country to allow the return of weapons inspectors, who left in December 1998.

The pending Russia-Iraq economic deal is likely to be seen by Washington as another blow to its efforts to marshal backing for an attack.

Sanctions imposed by the Security Council after Iraq's 1990 invasion of Kuwait cannot be lifted until U.N. inspectors certify that its biological, chemical, and nuclear weapons have been destroyed along with the long-range missiles to deliver them.

Moscow has supported lifting the U.N. sanctions, hoping that would allow Baghdad to start paying off its $7 billion Soviet-era debt and help expand trade. The Russian Foreign Ministry said Saturday it had no comment on reports of an imminent economic cooperation agreement.

The agreement, which envisions new cooperation in the fields of oil, irrigation, agriculture, transportation, railroads and electrical energy, will most likely be signed in Baghdad in the beginning of September, Khalaf told The Associated Press.

Khalaf emphasized that the new cooperation deal, which is to include new projects as well as the modernization of some Soviet-built infrastructure, would not violate the sanctions.

In the current standoff with the United States, Iraq is counting on Russia to use its leverage in the U.N. Security Council and other diplomatic channels to deprive Washington of international support for a military operation, Khalaf said.

"First of all we need moral, political and diplomatic support. Because Iraq knows how to defend itself," he said. "The main thing for us is that American aggression does not go through the U.N. Security Council and that America does not receive a U.N. mandate. ... Let America act [alone] as an aggressor. It will be condemned from all sides."

Khalaf said he saw no contradiction between Russia's friendship with Iraq and its ties with Washington, which have strengthened since the Sept. 11 attacks.

"We see friendship among various countries and civilized peoples of the world as a positive step. Any enmity brings harm to a country," he said.

Under Putin, Russian foreign policy has sought to create a network of alliances to counterbalance alleged U.S. domination of international affairs. Although Putin has moved Russia closer to West -- including increasing contacts with NATO and not raising objections to U.S. forces in Georgia and in former Soviet Central Asia -- he also has pursued relations with countries that are anathema to the United States.

Last month, Russia announced a 10-year plan for nuclear cooperation with Iran. Under the plan, Russia would build five reactors in addition to the one currently under construction at Bushehr, Iran. Washington fears such cooperation could help Iran develop nuclear weapons.

This week, the Kremlin announced that North Korean leader Kim Jong Il will visit Russia later in August for the second summer in a row.

In 1939, the Soviet Union entered into a non-aggression treaty with Nazi Germany, ensuring that the backside of Hitler's war machine would remain safe while the two dictatorial nations divvied up much of Europe. The treaty lasted until 1941, when Hitler invaded the Soviet Union.

The Associated Press contributed to this report.