August 29, 2003

Jubilee Iraq is delighted to receive the support of Archbishop Desmond Tutu, who was instrumental in the struggle against apartheid in South Africa - an oppressive regime which, like Iraq, was financed by foreign creditors. In 1994 Nelson Mandela's new government was required to begin repaying these loans, at the same time as trying to repair the social dislocation and inequality caused by apartheid. Iraq is faced with similar problems after three decades of oppressive minority rule, but a much larger debt burden and the added ravages of wars and much harsher sanctions.

Archbishop Tutu has campaigned extensively on the debt crisis, for example in an 1997 article Drawing a line under odious debt. He wrote that "In the case of South Africa, its foreign and domestic debt was incurred, by and large, under the apartheid regime, and should be declared odious and written off. In terms of debt repayment this would mean we would have a massive R39-billion per annum which would be available for social reconstruction and development."

He notes that the new South Africa has already applied the odious debt principle when it "wrote off Namibia's debt to it, [since it was] incurred while Namibia was illegally occupied by the apartheid government."

The mechanism which Archbishop Tutu proposed was "a mediation council, whose responsibility will be to negotiate the repudiation of debts of developing countries. Such a council should consist of four parties - an independent international body, a similar regional body (for example, the Organisation of African Unity), the International Monetary Fund, and the country concerned." A body like this, like the arbitration tribunal proposed by Jubilee Iraq, would redress the balance of power between the creditors and debtors to ensure a fair assessment of odious debt.

Looking to the future, he proposed standards for future lending. These are worth considering if new debt is to help finance the reconstruction of Iraq:

• "No country should be permitted to borrow more than a fixed percentage of its GNP without first going to its people, for example in a referendum, to obtain their approval. In this way, communities would be able to contribute to national debates as to whether they wish to incur international debt."


• "No debt should be incurred for the purposes of military expansion or arms purchases of any nature whatsoever or for maintaining oppressive governments that violate fundamental human rights."


• "Where a debt has been cancelled, any provision that would have been made to service the loan had it not been cancelled, must be redeployed for the development of people and infrastructure."

August 27, 2003

The importance of eliminating debt becomes clear with each new estimate of the costs of reconstruction.

Paul Bremer told the Washington Post that it is "almost impossible to exaggerate" Iraq's economic needs. He acknowledged that oil revenue is low. He said it will take $2bn to restore the Iraqi electricity grid by next summer and about $13bn over five years to overhaul it completely. Supplying clean water nationwide would cost an additional $16bn over four years.

Some earlier estimates from McKinsey were:

$10bn-15bn for electricity and telecoms
$35bn-40bn to increasing oil production capacity to 6-7 million barrels a day by 2010.
$10bn-20bn to return to 1970s level of health care
$6bn-12bn to restore eductation infrastructure
$?bn to rebuilding 40,000 km of roads, three main railway lines, three main airports and two ports

August 25, 2003

U.N., World Bank and IMF officials will meet in Brussels on 3rd September with representatives of the CPA to lay the groundwork for the donor conference in Madrid on 23rd October. Representatives of the US, Japan, EU, UAE and Spain will attend. U.N. chief spokesman Fred Eckhard said work "has almost been completed" on the needs assessment, which is being prepared by the multilateral organisations.

August 23, 2003

The National Post today reports on Polish troops being deployed to Iraq, the largest military operation by Poland since 1939, and mentions that "one theory of the Polish presence is that it will be a way of collecting on old Iraqi debts."

Dow Jones reports today that Europe's leading debt collection agency, East-West Debt, has given up on collecting Iraqi debt. The article explains that UN SCR 1483 blocked commercial creditors from siezing Iraq's assets to reconcile defaulted bank loans. However Jubilee Iraq understand that the resolution only prevents siezure of oil for this purpose; Jordan has recently siezed assets as security for debt payment. Didier Debaere, head of East-West's legal department, told Dow Jones "We are closing down our last Iraqi files."

August 22, 2003

All 6 IMF employees in Baghdad were wounded in the UN bombing, and the World Bank has withdrawn its 14 staff to Amman, one of its Iraqi employees was killed. They have been assessing Iraq's economic needs in preparation for the donors' conference in October. Their work, which will be the basis for the Paris Club's treatment of the debt, will clearly be disrupted. However the Bank has assured that "The blast this week will not halt the bank's ongoing assessment of Iraq's reconstruction and development needs, which will be completed as scheduled." The IMF team assessing non-Paris Club debt was working outside Iraq anyway, so their report will hopefully not be delayed any further.

August 20, 2003

Bulgarian Foreign Minister Solomon Passy said on monday that President Bush has promised that Bulgaria would be among the first countries to receive their debts from Iraq. Jubilee Iraq hopes this is incorrect, and stresses that neither President Bush, or anyone else outside Iraq, has no right to decide whether and to whom Iraq pays debts.

The World broadcast a good but brief item on debt today, including quotes from Ahmed Jiyad, an former Iraqi debt negotiator.
[Windows Media File, 1MB: click to play or right click to save]

August 15, 2003

The first newspaper article on Iraqi debt in a few weeks was in the FT yestarday, good overview of commerical debt by Paivi Munter:

US investors are moving into the market in Iraq's distressed commercial debt, since being given legal permission by the Treasury in July. The syndicated loans illiquid but trading at about 30 cents to the dollar, up from some 10 cents a year ago. Susan Payne, chief executive officer at Emergent Asset Management, a UK-based hedge fund. "We think this is a good credit - an oil-rich country with a prospect of a [debt] restructuring."

One interesting line in the article, which quote the ususal $2.6bn figure for the London Club is "Now traders in Iraqi debt are focusing on the fate of the unpaid interest. No one knows the total, but market participants say they expect it at least to match the principal owed. If a restructuring deal equates interest with principal, it means that the total covered by the agreement could be doubled and the potential gains for holders of the debt could be large."

August 13, 2003

The Iraq donor's conference in Spain will be in Madrid on 23-24 October, involving around 50 countries. Announced on Spanish state radio by Fernando Diez Moreno, a defence ministry official.

He said Iraq's oil industry was "in a lamentable state" and would take several years to return to production levels last seen before the 1991 Gulf War. The need for the conference had arisen from the certainty that Iraq would run a "substantial budget deficit" in 2004 and 2005, the minister said, adding that the Iraqi deficit forecast for this year was two billion dollars.

August 10, 2003

The website has just had a long overdue face lift. Do let us know if you spot any glitches, broken links etc. or if you have any suggestions for additional content which would be useful.

August 08, 2003

Spanish Deputy Prime Minister Mariano Rajoy has announced that Spain will host the international donors' conference for Iraq this autumn, but the date of the conference had not been set. Jubilee Iraq understands that it will be in October. A preparatory meeting will be held in September. The World Bank, UN, EU, US, UAE and Japan will participate in the conference.

Jubilee Iraq expects that the IMF survey of non-Paris Club debt will be published in time for the conference, probably in mid-September. It was initially expected in July, but the IMF has had difficulty in compiling figures and/or in persuading creditors to make their claims public, hence the delay.

August 03, 2003

Mushtak Parker, writing in Saudi Arabia's english daily, Arab News, recently argued that "Iraq's vast oil reserves may be seemingly good collateral, but in the short-to-medium term will not be enough to meet the pernicious cycle of debt and interest servicing. Unless there are some debt write-offs, at least the interest, Iraq will be facing the future with a major noose round its neck." However Kuwait's pro-government daily Al-Anba ran a front-page editorial which said that Iraq should continue to pay reparations from Saddam's invasion. Jubilee Iraq is working to get the the issue of debt discussed in the Arabic media, and we would be delighted to give interviews and background briefings to any interested journalists.

August 01, 2003

Anthony Cordesman of CSIS, writing in the Financial Times, suggests a number of blunders which could "create a third Gulf war" including: "The US fails to confront its allies with the need to forgive Iraqi reparations and debt - claims potentially amounting to more than $200bn - leaving Iraq angry and without a financial future." Jubilee Iraq shares Cordesman's fears.