Putin made the offer to cancel a large chunk of the $8 billion that Baghdad owes to Moscow in talks on Monday with a delegation from the US-appointed Iraqi Governing Council, a Kremlin official said on Tuesday.

The official stressed that the announcement by members of the Iraqi delegation that Moscow would forgive 65% of the debt was premature. 

"There is no question of us writing off 65 percent just like that. We have not taken this decision, we are ready to consider it," the official said.

"Russia did indeed express a willingness to examine the question of restructuring Iraq's debt within the framework of the Paris Club (of creditors)."

"But Russia will look at this issue in a broader context and is willing to take a step towards the Iraqis only if Russian interests are respected, by which we mean the participation of our companies in Iraq's oil sector," he said.

Historical deals

Officials in the Iraqi delegation said the debt owed would be reduced to $3.5 billion. 

The sum represents debts owed by Baghdad to Moscow from the Soviet era.

Moscow signed contracts worth billions of dollars with Saddam
Hussein to develop Iraq's vast oil reserves - the world's second largest after Saudi Arabia.

"There is no question of us writing off 65 percent of Iraqi debt just like that. We have not taken this decision, we are ready to consider it"

Kremlin official

But Russian companies' chances of fulfilling these contracts are in doubt because of Moscow's fierce opposition to the US-led war on Iraq along with Germany and France.

Meetings in Moscow

The Iraqi delegation on Monday met with the head of Russia's oil giant LUKoil - which is trying to win back rights to the West Qurna oil field that is believed to hold reserves of at least 15 billion barrels of oil.

The old Iraqi leadership tore up the contract last year amid reports that LUKoil was secretly negotiating with the Iraqi opposition in expectation of Saddam's imminent fall. 

But the current head of the Iraqi Governing Council, Abdul Aziz
al-Hakim, was non-committal when asked by reporters about the West Qurna deal.

"The question must be discussed between our energy ministers. This is a technical question," he said on Monday.