Bulgarian Finance Minister Milen Velchev and his deputy Krassimir Katev have returned from a visit to the US to Iraqi debt to Bulgaria. They met representatives of Congress, the Senate, Bechtel and the State Department. After the meetings Velchev said Bulgaria was willing to wait a couple of years more, as it had waited for 13 years already to get back its debt from Iraq. "What is really important is to receive as large percentage of the debt as possible." He said all representatives of the administration showed understanding for the issue. "What we want to achieve is a start of the negotiations for the returning of the debt as soon as possible, but for the purpose we need a legitimate subject [iraqi government] with which to hold the talks... There is the option to sell the debt to investment banks and to receive $250 million within a week, however, we wish to get back a larger share of it."

The UN Compensation Commission yestarday completed it's 48th session and made awards totalling $2,275,177,243 for losses from 1991, mainly to Kuwait. Cash payments with money taken from Iraq's Oil-for-food fund are due to begin in the 3rd week in July. The UNCC will be paying $200m in reparations each quarter, a similar amount to the UN's recent appeal for $259m to meet the shortfall in critical humanitarian relief for Iraq. It is crazy that while Iraqis are suffering such huge sums of Iraqi's own money is being transfered for losses incurred by 12 years ago for which Saddam was responsible, not the oppressed Iraqi people.

Bulgarian Finance Minister Milen Velchev has been in Washington discussing Saddam's $1.7bn debt to Bulgaria. No information yet on what decision was reached, but Bulgarian National Radio reported today that the US has agreeed to provide a compensation of $130m to Bulgarian firms which suffered damages over war in Iraq. The most shocking part of the report was this: "The US is most likely to fulfill the repayment by oil deliveries from Iraq." If this report is correct (and Jubilee Iraq sincerely hopes that it is not), this appears to be the beginning of reparation payments from Iraq for the recent war, on top of those for the invasion of Kuwait.

Gennady Seleznyov, the speaker of the State Duma, told the Portuguese daily Diario de Noticias that Russia "will not wipe out the debt." He said "We would love to discuss the total amount of the debt with the legitimate Iraqi government, but unfortunately that does not exist any more. I am convinced however that we will reach an agreement in the future on how this debt is to be reimbursed."

The UN compensation commission (UNCC) spokesman Joe Sills said that it expected to take $600m from Iraq this year. This is over twice the amount requested in the UN's new appeal for $259m to meet a shortfall in humanitarian funding this year.

This fiasco is reminiscent of the 8th of April: US troops were taking control of Baghdad, Kofi Annan had a fresh mandate for control of the Oil-for-Food fund, the UN was launching a flash appeal for humanitarian aid... and $870m was paid from Oil-for-Food to the UNCC and thence to Kuwait, Britain, France, America etc. The Iraqi people would be perfectly able to look after themselves if they were not forced to continue paying Saddam's reparations and debts, for which they are not responsible.

The UNCC governing council (which has the same membership as the UN Security Council) will rule this week on the biggest claim - $86bn filed by the Kuwait Investment Authority. Kuwait has also lodged environment-related claims of $80bn which will be assessed next year. This week's meeting will try to agree how to prioritise reparations payments. There is said to be strong support for a decision to "clean up" smaller payments, worth about $4bn, first, which would further delay payment of big awards, mostly to Kuwaiti companies and the Kuwait government. Kuwaiti officials protested that priority had been given to small claims at the outset and now that instalments were being paid on larger claims it was not fair to reverse the process. "The UNCC was not established for humanitarian purposes. [Prioritisation] would be unfair to the government of Kuwait and to the Kuwaiti people who suffered the most," said Khalid al-Mudaf, chairman of the board of Kuwait's public authority for the assessment of compensation for damages.

The Chairman of Credit Suisse First Boston, David Mulford, writing in the Financial Times, together with Michael Mondereris, a senior consultant on sovereign debt, calls for a tribunal to cancel Iraq's odious debts.

They note that US officials have backed off from calling for odious debt cancellation and are now merely talking about "debt relief, which covers anything from short-term deferral to forgiveness." They argue that the US should resume it's original position and "the Paris Club should not be the forum for negotiations... Paris Club methodology is biased against debt write-offs for middle-income countries and oil exporters, even those that are obviously insolvent. It uses often inaccurate economic projections and assumes that all export receipts and capital inflows accrue to the government and that funds not used for imports can be used to repay debt." (Jubilee Iraq has long argued that the Paris Club is the wrong forum for negotiations).

"There is a better approach to Iraq's debt burden. First, there should be a three-year moratorium on Iraqi debt payments without interest accruing. Second, an international Iraqi debt commission of financial "wise men" should be established to examine all claims and to disallow debt used for state security or military aggression. Only loans for verifiable economic purposes should be collectable." (this is an application of odious debts, Jubilee Iraq's proposal differs only in that we believe that an arbitration tribunal composed of Iraqis, creditors and neutrals, would be fairer to all parties than an international commission).

"Third, the commission should chair negotiations to restructure the remaining legitimate debt with a substantial reduction in present value through a partial write-off or extended rescheduling. The commission should be empowered to force unco-operative creditors to accept an agreement consistent with Iraq's reconstruction and development needs. Fourth, there should be a debt/equity swap programme to encourage private investment in Iraq and give companies a role in the rebuilding. Claims could be sold to investors at deep discounts and redeemed into private sector investments or privatisations."

Amnesty International has today launched a report "On Whose Behalf" on human rights and the reconstruction process, which mentions the enormity of the debt problem. No policy as such on the debt yet, but we have been discussing this with them. Here is a press release summary.

Carolyn Maloney (D-NY) and Jim Leach (R-IA) yestarday introduced House Resolution 2482 into Congress which instructs the Treasury Secretary to influence the World Bank and IMF to cancel or radically reduce the c$150 million of debt owed to them. The legislation also includes a sense of Congress asking the President to urge other public and private creditors to relieve Iraq of its debts. “There is a powerful moral case for relieving the Iraqi people of the debts incurred by Saddam’s murderous regime.” said Rep. Maloney.

Jubilee Iraq welcomes the explicit recognition in this legislation that much of Saddam's debt is odious, the text reads "A significant amount of Iraqs outstanding loans were taken out at the behest of Baath Party leadership and rather than being used for the benefit or the well-being of the Iraqi people were used for building lavish palaces, secret police, prisons, and illegal weapons programs. According to international precedent, debts incurred by dictatorships for the purposes of oppressing their people or for personal purpose may be considered ‘‘odious’’. In cases where borrowed money is used in ways contrary to the people’s interest, with the knowledge of the creditors, the creditors may be said to have committed a hostile act against the people. Under such reasoning, such debts may be questioned."

Jubilee Iraq also notes that, while US officials tend to stress France and Russia's role as creditors, other countries also financed Saddam including Saudi Arabia, Kuwait, Japan, the US and Britain.

Basil al-Rahim, founder of the Iraq Foundation, testified before the US Senate Joint Economic Committee on Wednesday that Iraq's GDP per capita is just $1,000. He said to afford to begin paying the $380bn debt the per capita GDP needs to increase to $10,000 in five years and $20,000 in 10 years.

President of the World Bank, speaking at a Monitor breakfast on globalization, he said "There will be significant pressure to deal with the question of debt and there will have to be some form of debt reduction. What we are trying to find out at the moment is how much debt there is out there. ...so the question in the end is who is going to pay? If Iraq takes its oil funds to pay back debt, then someone has got to come up with money for the development of the country. If you can get people to forgive the debt, then that money can be used for development. So this is a concealed debate about who is going to pick up the bill." When asked why Russia might want to cancel debts he said: "I don't know. What I have learned in this business is that there are a huge number of trades that are done that you don't see. They may want to do it for reasons totally unrelated to Iraq. This is the wheeling and dealing that goes on at the meetings I don't attend." Jubilee Iraq notes that he assumes the debt is legitimate and the issue is one of "forgiveness", whereas the key issue is not "who is going to pick up the bill" but whether any of the bill is valid.

International Monetary Fund spokesman Thomas Dawson told reporters yestarday that the IMF officials working on calculating the debt stock hope to present a preliminary report to the IMF's executive board within the next two weeks.

Japan reported to the Paris Club yestarday that it has about $7 billion yen of loans outstanding. The total is more than the $4.2bn estimated in April because it includes losses from missed trade insurance payments by Iraq to private Japanese companies. Japanese public-sector entities are owed $4.109bn plus a further $2.919 billion in penalties due to delayed repayments. Of the total, the government's trade insurance funds were owed $3.432 billion in principal and $195 million in interest, plus $2.751 billion in penalties, or "late interest", as of 1st January 2003. The Japan Bank for International Development (JBIC) was owed $360 million in principal and $122 million in interest, plus $168 million in penalties.

Richard Perle, the influential Pentagon adviser, yesterday called for the complete forgiveness of Iraqi national debt. "If the French banks, the German banks and some American banks are unhappy about that," Perle said, then they would have learnt a lesson about the "moral hazard. . . of lending to a vicious dictatorship." The Financial times notes that Perle was not speaking on behalf of the US administration, but in a personal capacity. Jubilee Iraq notes that Perle's comments are similar to those made by his Defence Department ally Paul Wolfowitz back in April. They differ markedly from the view of others in the Administration such as Colin Powell who told Russian radio that he expected Iraq to pay Saddam's debts.
(1) Perle's comments (at least those reported) are misleading about the nature of the debt. Very little is owed to banks, the vast majority is to countries, including the US and in particular to the US's Arab allies Kuwait, Saudi and the other Gulf states.
(2) The focus on France and Germany, who together hold probably less than 5% of the debt, is very unhelpful. It is welcome however that Perle acknowledges that American banks were lenders. The Regan Administration was also a major lender, of around $4bn.
(3) Nevertheless, Perle is correct that cancellation of odious debts is morally right and will teach banks and countries (including the US) a valuable lesson about financially support for dictators.

Chairman Jean-Pierre Jouyet told Reuters they would know the figures in July. However, Jouyet said there had so far been no discussion of whether Iraq would need a writeoff. "Because we are still collating the data, there are no substantial discussions about the future of the debt. Once the data has been collated, the Paris Club would need to see an International Monetary Fund mission to Iraq and the adoption of a programme." An IMF team is due to arrive in Iraq today.

A gathering of independent Iraqi democrats in Baghdad discussed economic problems and solutions. Issues included oil, debts, reparations, salaries, unemployment, low living standards, privatisation and reconstruction. Speakers included Dr. Adnan Pachachi (President of gathering), Dr. Mahi Al Hafeth (Deputy), Dr. Faik Ali Abid Al Rasoul and other experts. The spokesperson for the gathering said "Iraqis must have an important role in economic decision making, in spending Iraq's revenue and in creating a mixed economy that does not depend solely on oil revenue. There is conseus that reparations should be cancelled and a radical look should be taken at the debt, leading to cancellation of most of it. Unemployment has become a great problem which will shape the future of iraq and its stability, and this is an economical/political issue that needs immediate resolution." Arabic link

Ludwig Georg Braun (President of DIHK, the Association of German Chambers of Industry and Commerce, and Chairman of healthcare multinational B.Braun), said the Iraqi people had suffered terribly under the 12 year UN embargo and under the wars and therefore, Iraq must be given a chance for a new beginning similar to Germany after World War II. He suggested that creditor states should agree a remission of the debts in a concerted action. He was speaking in Berlin at the 6th annual forum of German and Arab business people, organised by Ghorfa, the Arab-German Association for Trade & Industry.

Adnan Al Pachachi (Iraq's Foreign Minister in the 1970s before Saddam and expected to be involved in the forthcoming interim government) said in a lecture in Abu Dhabi that revenue from oil exports and the country's frozen assets of more than $10 billion would not be enough for reconstruction. "What we need is external help, including measures by major creditors to write off Iraq's debt….Iraq should also be exempted from paying war damages under UN resolutions as it badly needs those funds for its future."

No specific statements on Saddam's debt, nor anything on new Paris Club terms.

Iraq: "We welcomed the unanimous adoption of United Nations Security Council Resolution 1483 and share the conviction that the time has now come to build peace and reconstruct Iraq. Our shared objective is a fully sovereign, stable and democratic Iraq, at peace with its neighbours and firmly on the road to progress. We welcomed the announcement made by the UN regarding a preparatory meeting for an international conference on the reconstruction of Iraq."

Debt: "We reaffirmed our commitment to the Heavily-Indebted Poor Countries (HIPC) initiative, launched at our Cologne Summit. Since Kananaskis, where we pledged to provide our share of the shortfall of up to $1 billion, progress has continued in the implementation of the HIPC initiative. Twenty-six of the world's poorest countries are now benefiting from debt relief, totalling more than $60 billion committed in nominal terms. However, in the light of continued implementation challenges and the slow pace of country progress in the initiative, we have identified the following priority areas..." see Evian website for more

"This briefing paper argues that the country’s debt is unpayable, but also that that there are wider moral and legal grounds for reducing Iraq’s debt burden. It sets out a case for treating Iraq’s debt as odious and illegitimate – and it explains why ordinary Iraqis should not pay for a debt accumulated by a tyrannical regime, borrowing from irresponsible creditors."

Alexei Kudrin (Russian Finance Minister & Deputy Prime Minister) reiterated at a conference for investors that Russia intends to defend its debt interests. Iraq is not "among the poorest countries", and this position is the basis for determining the scheme of debt restructuring that can be applied to Iraq by the Paris Club.

Paul Bremer (Head of Coalition Provisional Authority) called on countries that lent Iraq money when it was run by Saddam Hussein to forgive these because the country should not be forced to use its resources to "service crippling debts." He called for a "substantial reduction" not just deferral of payments but offered no specific debt forgiveness proposals. It must be noted that the US has made no moves to cancel its own debt claims and Colin Powell told Russian radio two weeks ago that he expect Iraq would pay.

Today Jubilee Iraq supporters, along with debt campaigners from many other countries, led a march of 100,000 people from Geneva to the French border (photo). We stress this was a peaceful, colourful march with lots of dancing and singing, unconnected to violent clashes between masked thugs and riot police. Jubilee Iraq was interviewed by the UK's Daily Telegraph and the BBC World Service's Arabic department.

Yestarday in Geneva there was a citizens tribunal on debt attended by about 400 people from many nations. Two hours was devoted to the issue of Saddam's debts, and there was general agreement that these are largely odious. Eric Trousaint (CADTM) suggested that comments by some US officials regarding debt cancelation last month were intended as bargaining chips to gain French and Russian support for the recent Security Council Resolution. Jubilee Iraq concurs with this and we call on the US, if it is serious, to immediately drop its own $5bn claims or at least submit them to the arbitration tribunal we are proposing.

We hope for some positive developments at the G8 summit but are pessimistic about the likelihood of this. So far Evian has been an important opportunity to network and many debt campaigning groups around Europe and beyond are beginning to focus on Iraq. As one delegate told us "if the world can't agree to write off Saddam's odious debts, then there is no hope for any other poor indebted countries". More meetings tomorrow - you won't see any of this on the news which will report violent protests and the G8's talking shop, but behind the scenes global civil society is beginning to unify to ensure that the Iraqi people are not forced to pay Saddam's odious debts.