But according to the minutes of their talks which he signed with Iraqi Oil Minister Amir Muhammed Rasheed, Russia remains entrusted with the contract worth $3.5 billion to develop the seven to eight billion barrels of reserves in Qurana oilfield. Kalyuzhny said the difficulty in implementing the deal signed in 1997 stemmed from the UN sanctions which ban Iraq from exporting its oil freely as well as foreign investment in its oil sector as punishment for Iraq's 1990 invasion of Kuwait.

"Over the last few days of discussions, we were able to resolve most difficulties...But despite this, I should not hide that there are still other problems," he told reporters after signing the minutes with Rasheed on Friday. "But we will find new ways to resolve these problems," headded.

Rasheed also admitted that there were "some difficulties" facing the two sides. Kalyuzhny detailed several other projects Russian firms would implement in Iraq under a new agreement such as oil excavation, drilling and development of Iraq's oil refineries and gas oilfields.

He said he had agreed with Iraq that Russian firms like Tatneft, Bashneft, Rosneftegazstroy along with Lukoil would carry out various jobs in Iraq."Our duty is to work and that work should not be suspended," he said, adding that "This should not complicate our efforts to lift or ease the sanctions."

But the Russian minister, who said his country maintains strategic relations with Iraq, made it clear that Russia would respect the UN sanctions. "We will deal with Iraq in accordance with current existing circumstances," he said. In 1997, Russia's largest oil company Lukoil and a number of other Russian firms signed the contract to develop Iraq's West Qurana field. Iraq has in the past expressed its displeasure over Russia'sperceived reluctance to fulfil its commitments under the deal.

"According to the contract that work should start but since 1997 up to now, the desired results in this respect have not been reached yet," Kalyuzhny said. The minutes, signed at the end of three days of discussions, stated that Russia would provide Iraq with a range of commodities under Iraq's oil-for-food deal with the UN. The deal allows Iraq to sell $5.26 billion worth of oil over six months to buy humanitarian goods for Iraqi people.

Kalyuzhuy arrived in Iraq on Tuesday, met President Saddam Hussein on Thursday and delivered to him a message from Russian President Boris Yeltsin.