The Paris Club have outlined the methodology by which they intend to structure the terms of debt treatment for Iraq. The Evian Approach, named after the recent G8 summit at which this proposal was first floated, was formally agreed on 8th October but only press released this Wednesday.

Although not Iraq-specific, the Evian Approach is clearly designed with Iraq in mind. The content which has been made public is typically vague:

"To design the comprehensive debt treatment, Paris Club creditors will resort to a menu of options with a view to tailor their response to the debtor countries' situation according to the results of the debt sustainability analysis conducted in close coordination with the IMF. Debt reduction will continue to be considered only in exceptional cases and when the need is clearly demonstrated."

This framework might allow the Paris Club to implement a reduction of Iraq debt by 66% or more, as called for by World Bank President James Wolfensohn earlier this week. This is certainly a step forward which Jubilee Iraq welcomes, however the Evian Approach retains three fundamental flaws of Paris Club debt treatments which make it unacceptable to Iraqis:

(1) This is no consideration of debt legitimacy. Commercial loans to build factories and hospitals are treated in way as odious loans which financed Saddam military and lined the pockets of his supporters. Hajim Al Hassani of the Iraqi Islamic Party told us: "Iraq is not responsible for any debts which supported the regimeÂ’s war machine. They are asking us to pay for the knives they gave Saddam to slaughter us. Really it is the creditors who should be paying compensation to Iraq."

(2) The power remains firmly in the hands of the creditors, and Iraqis can only hope for generosity. One of Iraq's most senior Sunni clerics, Sheikh Mauyed, put it this way: “In the Paris Club process, the enemy is the judge, this cannot be fair."

(3) The debt treatment remains tied to IMF structural adjustment policies. These policies have been incredibly damaging to some countries and to the poor in particular. Saleh Yasir of the Iraqi Communist Party told us, "An IMF structural adjustment program would create more social tension and cause a social explosion which might destroy the transition to democracy." But even Iraqis who broadly agree with IMF economic policies are unwilling to hand over their newly gained freedom. On the subject of IMF conditionality Oil Minister Ibrahim Bahr Al-Uloum told us: "We are Iraq! We were the cradle of civilisation and I donÂ’t want to see anyone controlling our economy by any means."

Congressional negotiators have decided that the $18.4bn requests for reconstruction funding in the appropriation package for Iraq will be in the form of grants not loans (as the Senate favoured). The Senate negotiators voted 16-13 not to insist on the loans.

Something from the archives here. Sandy Berger, President Clinton’s National Security Advisor, discussing the possibility of an end to Saddam's regime, said back on 8 December 1998. “We will also stand ready to help a new government in Iraq that respects the rights of its people and meets its obligations to the world. We would work to ease economic sanctions against such a new Iraq as quickly as
possible. We would work to relieve Iraq's massive economic debts. Those debts were acquired by Saddam to build weapons that the Iraqi people did not want or need; their children and grandchildren should not have to go hungry to pay the bill.”

James Wolfensohn, President of the World Bank told the National Press Club in Washington yestarday that Iraq should have debt cancellation at at least the level (66%) applied to Yugoslavia: "It will need to be at least that to give the country a real chance of getting back to equilibrium, so I think a target of something north of two-thirds will be what people will be looking at."

He said negotiations over debt relief are likely to be extensive and involve a number of trade-offs with countries offering to forgive a portion of the debt in return for the ability to bid on new construction contracts. "If I forgive this, can I have access to this?'' He said the negotiations would likely resemble a bazaar and the dealmaking began last week during a donors' conference in Madrid. He estimated the debt as least $120 billion plus $30-40 billion in war reparations.

Speaking at a press conference yestarday, President Bush spoke in public about Iraqi debt for the first time: "Let's don't burden Iraq with loans. The only thing they'll be able to repay their loans with is oil. And, hopefully, we'll get a good solution out of the Congress on this issue. We're making progress. We're working hard with the members to make the case that it's very important for us not to saddle Iraq with a bunch of debt early in the emergence of a market-oriented economy, an economy that has been wrecked by Mr. Saddam Hussein. I mean, he just destroyed their economy and destroyed their infrastructure, destroyed their education system, destroyed their medical system, all to keep himself in power."

Kuwait's Kuna news agency reported yestarday that the Foreign Ministry denied a media report attributed to a Kuwaiti official on the intent to write off Iraqi debts. "There is no intention to write off the accrued debts due from Iraq", the Foreign Ministry confirmed. The statement underlined that Iraq's debts are "due and there is no intent to write it off", adding that Kuwait addresses this issue as stipulated by the UN Security Council resolutions.

Anwer Sher, President of UAE-based Sher Consulting and former CEO of Union National Bank, writes about Iraq and the debt dungeon in the Emirates English-language Gulf News today. While not advocating complete debt cancellation, the article emphasizes the economic threat posed by Saddam's debt.

"It is imperative for the survival of Iraq as an economically viable economy that the uncertainty regarding its financial future is resolved immediately. There is no denying that serious financial investments will not be coming into the country till some basic issues regarding the debt issues within Iraq are resolved first. The Saddam debt remains a huge ominous shadow across the financial face of a country that is technically bankrupt at the moment... A return to financial health is all the more difficult for Iraq given that by the end of 2004 a substantial part of its old debt comes up for repayment. This happens at a time when Iraq has to incur new debt obligations to simply rebuild the country."

George Melloan, writing in today's Wall Street Journal, says "Iraqi debt could range between $150 billion and $200 billion. Whichever amount you choose, it is beyond any reasonable measure of sustainable debt.... Bankers often are a bit careless when in dire need of sources of interest income... But there are other reasons why a madman like Saddam could attract so much credit... voluntary lending, amounting to as much as $100 billion, perhaps, was done mainly by sovereign nations, including Russia, France, Germany and the U.S. All of it had to do with politics, in one way or another. A great deal could be explained by Saddam's fondness for lethal weapons. Even the U.S. supplied him with weapons in the 1980s when he was fighting Iran."

Fahad Bishara, a Kuwaiti student, writes in the University of Calafornia newspaper: "To start a country off on the path of democracy while forcing it to pull along a heavy debt cart will most certainly account for greater problems and civil unrest in the future... Put simply, the money is not worth the trouble the debt can cause... it is up to us to forgive and forget."

Reutuers reports that "Tokyo on Friday poured cold water on campaigners' calls for debt forgiveness, saying such a move would send bad signals to private investors." No further details at present.

Jean-Louis Salas, managing director of energy, exports and projects in Iraq at the French bank BNP Paribas, told the private sector conference at Madrid last week that Iraq's crushing debt makes new lending difficult.

A German spokesman said German would only consider a moratorium, not debt cancellation. "A complete debt forgiveness by the German government can scarcely be considered," government spokesman Thomas Steg told a news conference in Berlin yestarday. "It is certainly right to say that if the reconstruction of Iraq can be helped by a debt moratorium then the Paris Club is the right place to consider the question." He told reporters. Iraq's potential oil wealth means it should not be treated in the same way as the world's poorest nations in debt negotiations. Steg was responding to a report in Monday's Handelsblatt newspaper which said Germany was considering debt forgiveness.

The G20, a group representing 80 of world income created in 1999 to avoid financial disasters and keep the global economy stable, has been meeting in Mexico. US Treasury Secretary John Snow said at the meeting.

"Our next step on Iraq is to quickly address the issue of its unsustainable debt. Doing so is of vital importance. I met bilaterally with several countries this weekend to advance these discussions."

He later told a press conference: "I had a good conversation with Minister (Francis) Mer of France, who indicated that the process was well underway, that they were already working the numbers. And with the other countries ... Germany, Russia ... we had good discussions and they affirmed their willingness to work through the Paris Club process" adding that he had a "clear sense of urgency to move on the debt".

The editorial in the Investors Business Daily today argued: "Much of Iraq's debts were rung up by Saddam Hussein's murderous regime. So Iraqis today are paying for the French mirage fighters and Exocet missiles and German machinery that Saddam bought to oppress them and invade their neighbors. France, Germany and Russia have repeatedly invoked international law as a reason for opposing the U.S. Well, there's also an international law doctrine known as "odious debts." It says the bills run up by a dictator don't have to be paid by those who survived the dictatorship. And that's exactly the case in Iraq."

The Forum 2000: Bridging Global Gaps conference in Prague, organised by Vaclav Havel, involving participants ranging from NGOs to government ministers to representatives of the IMF and World Bank, last week concluded that the issue of debt legitimacy (whether it is odious or not) should become part of standard international debt management. In particular it recommended that:

"For the imminent case of Iraq's foreign debt it is recommended that:
– Under a public and transparent process external debts are assessed for their validity and legitimacy before any debt servicing is resumed.
– A political initiative is taken to organize a comprehensive debt conference which would include all stakeholders, particularly Iraqi civil society groups."

Japanese Foreign Minister, Yoriko Kawaguchi, met with Paul Bremer in Madrid to discuss "Iraq's debt problem" (Kyodo News).

Aljazeera interviewed Dr Muhammad al-Ma'mouri, Professor of Economics at Baghdad University, who questioned just who would be held responsible for the repayment of the new loans announced at the Donor Conference. “There is no national authority in the country... The people of Iraq can never pay such amounts of money”. Refering to the old debts, he said "all international organizations said Saddam Hussein did not represent the people of Iraq", Then why, he argued, should the Iraqis be held responsible for the loans he had taken, particularly as they did not benefit from the Iraqi people by any means. This is another respected Iraq voice which concurs with what over 30 leading Iraqis told Jubilee Iraq over the last 3 weeks (see report).

In a surprise anouncement at Madrid, Prince Saud Al-Faisal, the Saudi foreign minister, stated "In recognition of the great burden of Iraq's debt crisis, Saudi Arabia is ready to reduce the burden of its official loans in the framework of negotiations with other creditors and on the principle of burden sharing." This implies its willingness to be involved in the Paris Club process.

However, Iraqis are not enthusiastic about the Paris Club, which does not consider the legitimacy of debts and requires debtor countries to submit to economic conditionalities. Furthermore all the Iraqi politicans interviewed by Jubilee Iraq over recent weeks insisted that Saudi funds to Saddam were gifts not loans, indeed gifts which harmed the Iraqi people through financing war and oppression. Saudi Arabia said it had extended $24 billion in loans during the Saddam Hussein era.

The long awaited IMF report on total debt claims against Iraq is still not completed, however Lorenzo Perez, the head of the Iraq mission, touched on debt in his comments at the donor conference.

"The current state of economic dislocation in Iraq owes much to a combination of pervasive state intervention, costly militarization, three wars, and over a decade of international sanctions. The economic dislocation led to a remarkable deterioration in Iraq's human development indicators, which only two decades ago exceeded regional averages. Despite proven oil reserves of about 112 billion barrels, second only to Saudi Arabia, GDP per capita declined from over US$3,600 in the early 1980s to about US$770-US$1000 in 2001. Even before taking into account reparation claims, Iraq is among the most heavily externally indebted countries in the world."

The projection of the 2004 fiscal deficit [$8.5bn or 55% GDP] "does not include the accruing interest bill on external debt which could be very large. External debt data is still being collected; however, based on partial information, the external debt stock is projected at close to nine times GDP." The GDP figure implied is $15.5bn for 2004, which implies debt of $140bn, this is probably excluding reparations.

"While Iraq's fiscal situation will improve over time as oil production increases and a stronger domestic tax effort is implemented, public finances will remain under strain in the coming years. Under these circumstances, for Iraq to achieve sustainable debt service payments in the future, it will need generous external debt relief."

At the Madrid conference, Governing Council Mouwaffek al-Rubaie called for creditor countries to cancel Iraq's debt and reparations.

Trade Minister Ali Alawi made a surprising remark at Madrid: "Iraq is not in the business of repudiating debts or negating contracts. Now we're very much in the business of enforcing contracts and living up to our agreements as a responsible member of the international community." Adding that it was a crucial step to encouraging foreign investors back into the oil-rich country. "We're hoping to start negotiations in 2004 with the Paris Club to restructure and redefine Iraq's debt to commercial creditors, including bilateral credit institutions."

This seems to run against the views of many Iraqi politicans (see the report of our consultation in Iraq) who favour repudiation of odious debt, the vast majority of Iraq's debt, if the creditors fail to write it off, something the Paris Club has never done in the past. Indeed Ali Alawi himself said in Singapore last week at least 65% of the debt should be forgiven because it was incurred by a "brutal, authoritarian, dictatorial regime."

Article in the Canada National Post by Jubilee Iraq legal expert Jeff King of the Canadian Centre for Sustainable International Law.

Susan Lee, one of the editors of the Wall Street Journal, writes "There are lots of things that have to happen to jump-start Iraq's economy... And the quickest, most effective way to attract private investment is to resolve Iraq's debt problem." She recommends a haircut (debt reduction) of at least 60% but shies away from supporting odious debt repudiation, citing the usual concerns about other countries emulating. She says that seeing Iraq paying old debt would make it easier for Iraq to access new credit, however the reality is quite the opposite. No prudent creditor would lend money to a country unable to pay its existing debt. While repayment record is one factor influencing credit worthiness, the change in Iraq has been so dramatic that markets are unlikely to decude that a refusal to service the old regime's debt is an indicator that the new Iraq will be unreliable in repaying future loans. In fact the Wall Street Journal made precisely this argument back in April

Yestarday the House of Representatives voted 277-139 in favour of a combined Senate-House Appropriations Bill which makes reconstruction funds loans rather than grants, like the Senate version of the Bill. All but 2 Democrats votes in favour, as did 84 Republicans. The vote was confused as it was on a bundle of unrelated issues including a popular provision to improve medical benefits for veterans and military reservists as well as the loan/grant question.

However the vote was nonbinding and House Appropriations Committee Chairman Bill Young said "I've made it very, very clear I have no intention" to include a loan in the final bill.

White House budget director Joshua Bolten marked the first veto threat. "If this provision is not removed, the president's senior advisers would recommend that he veto the bill. Including a loan mechanism slows efforts to stabilize the region and to relieve pressure on our troops, raises questions about our commitment to building a democratic and self-governing Iraq, and impairs our ability to encourage other nations to provide badly needed assistance without saddling Iraq with additional debt."

Forbes reports on a report on Iraqi debt by investment bank UBS. "We would expect the terms of settlement at least to reflect the dubious status of the loans, their use for military purposes, and political considerations," said UBS analyst Alex Garrard. "Given conservative assumptions, we believe debt relief of 75-80 percent from Paris and non-Paris Club country creditors would suffice." Assuming a 20-year repayment programme, a 75 percent write-off would result in debts being reduced to $66.2 billion, according to Garrard's research.

British activist comedian Mark Thomas has recorded a program in which he attempts to repay the debt by trying to raise money from the people and companies who have profited from Iraq. Setting off on a series of stunts to highlight the country's plight - repossessing an Iraqi-owned bank and attempting to sell it to traders in the City of London, hijacking a busload of arms dealers and asking for donations etc.

The program airs tomorrow (Wednesday) at 11.30 on Channel 4. Some Jubilee Iraq members have just watched a preview and its hilarious, so don't miss it!

For those outside the UK or who missed the program, here is a transcript with extras (such as a full interview with Joseph Stiglitz) on

"I rule out a complete cancellation of the debt," run up by former president Saddam Hussein's regime and estimated at 130 billion dollars (110 million euros), said Heidemarie Wieczorek-Zeul, German minister for cooperation and development. She stated that. given Iraq's oil riches, it would be better to have credit financing ahead of the windfall oil revenues will bring to the country.

The Sofia Morning News reports that Bulgaria's Parliamentary Speaker Ognyan Gerdjikov said upon his return from US that Bulgaria, as an ally of the US would enjoy preferences for the Iraq's debt to the country. The Bulgarian delegation visited the US on the occasion of the 100th anniversary of the establishment of diplomatic relations between the two countries. Gerdjikov explained that the US pledged to seek ways in which Bulgaria would be paid off at least a substantial part of the $1.7bn debt claimed against Iraq.

"We note that the greater part of Iraq's foreign debt was for weapons Saddam Hussein used to hang onto power. Repaying that debt will sorely tax Iraq's resources as it is; another $10 billion could make the task insuperable." (Denver Post)

Some flowery details in the Neocon Weekly Standard concerning Bush's meeting with Senators last week: He told the senators that saddling Iraq with more debt would be a terrible decision. "I'm not here to debate it," Bush told Susan Collins of Maine. When senators Olympia Snowe, also of Maine, Maria Cantwell of Washington, and others said their constituents wouldn't tolerate a grant, Bush slammed his hand against the table, saying, "This is bad policy."

Nations ponder Iraq's 'odious' debt millstone . Interesting quotes from the article:

"Unless a more permanent solution is found, Iraq faces 100 years of debt, it will be impossible for it to get back on its feet." (Nile Gardiner of the Heritage Foundation)

"We know the current situation is not ideal and we are not pressing for repayment. But when the time comes France has to make a decision. Iraq is not a poor country, and we will be waiting with the other creditors." (Marie Masdupry, a spokeswoman for the French Foreign Ministry)

The respected UK financal weekly, The Economist, argues in favour of writing off Iraq's odious debt. The arguments deployed below are precisely those which Jubilee Iraq has been advocating for 6 months. It is very encouraging that one of the worlds most highly respected business publications is in agreement:

The Iraqi debt problem highlights a huge unresolved flaw in the international financial system. There is an overwhelming case, both in terms of economic expediency and justice, for writing off most of Iraq's debts, and doing so fast. The uncertainty about Iraq's future financial condition is one reason why it is proving hard for it to attract new investment. The arguments made by Keynes with regard to Germany after the first world war remain valid today. Taking on Saddam's debt burden would cripple the new Iraq economically. Besides, it is clearly unfair to expect the Iraqi people to pay for the reckless waste of the regime that brutally oppressed them for so long.

Currently, the financial system does not deal with this problem sensibly. The Paris and London clubs will no doubt belatedly negotiate some sort of rescheduling and writing down of, respectively, Iraq's sovereign and commercial-bank debt. (There is no club for tackling corporate debt.) But they will almost certainly do so on the basis of what lenders judge to be Iraq's ability to pay - which will no doubt be on the high side - not on the rightness of its having to do so. That is not good enough. What matters is that Iraq is given the best possible chance of success. The donor meeting in Madrid next week should debate hard about how to give Iraq the debt forgiveness it needs almost as urgently as it needs peace.

The amendment to convert $10bn of the reconstruction money into loans passed in the Senate yestarday by 51-47. In the House, Democrats David Obey of Wisconsin and Tom Lantos of California led the campaign to covert grants to loans but lost, 226-200.

Senate Majority Leader Bill Frist, R-Tenn., promised to work hard to remove the loan provision when House and Senate negotiators meet, probably next week, to decide on the final version they will send to the president. The goal is to get the bill on the president's desk before next week's conference of donor nations in Madrid, Spain.

The clause in the Senate bill which would convert the loans back to grants if other countries cancelled 90% of Iraq's debt is some consolation. However the focus seems to have been more on US money than on getting Iraqi debt cancelled.

One supporter of Jubilee Iraq emailed us: "Normally people ASK for a loan, they're not forced to accept it. And they normally get to decide how to spend it too. Here most of the money will presumably be going to Halliburton. Way to win the hearts and minds, guys." This raises an important issue, is the CPA or the Governing Council legally or morally able to force loans upon the Iraqi people?

Sen. Ben Nelson (D-Nebraska), said he and other pro-loan senators hoped to have their amendment ready Thursday. "The loan is there to give an incentive to the holders of prewar debt to forgive their loans, and then we will forgive ours." The US loans would be converted to grants if the countries claiming debt reduced their claims by 90%.

Jubilee Iraq notes: If this does indeed happen, and the appropriations bill persuades other countries to cancel their debt and as a result the US money is a grant, all will be well. However if this does not happen, and Iraq is saddled with an additional $20bn debt on top of up to $200bn current debt, this would be a disaster. A future Iraqi government would have good reason to repudiate the new US debt, as the Iraqi people have had no more say in how the money has been spent than they did under Saddam's regime. It makes no difference to the Iraqi people if the profits are going to the Ba'ath Party or Bechtel.

Some senators are discussing making about half $20bn reconstruction package into loans that would become grants if Saudi Arabia, Russia, France and other countries agree to forgive much of the debt they are owed by Iraq. Also possible was a provision turning the loans into grants for every dollar of aid pledged by donor countries meeting in Madrid next week. "We're trying to maximize our efforts and reach a consensus'' said one of the participants, Sen. Susan Collins, R-Maine. Other senators involved in the effort include Sens. Evan Bayh, D-Ind.; Saxby Chambliss, R-Ga.; Lindsey Graham, R-S.C.; Kay Bailey Hutchison, R-Texas; and Ben Nelson, D-Neb. It was unclear when there would be a vote on the amendment, or what its prospects were.

The Senate voted 57-39 Tuesday to defeat an earlier proposal by Sen. Byron Dorgan, D-North Dakota, to turn the $20.3 billion into loans. Apparently Bush visited a meeting with a dozen senators hosted by Secretary of State Colin Powell and White House budget director Joshua Bolten. Bush argued that providing aid as a loan would complicate U.S. efforts to persuade other countries to forgive debt owed to them by Iraq, said Senator Maria Cantwell of Washington, who was at the meeting.

This is the first clear evidence we have seen that the US Administration is now favouring debt cancelation, and is a positive sign - the US could start with its own outstanding debt and reparation claims totalling about $5bn; the devil of course will be in the details.

Joseph Stiglitz, the winner of the 2001 Nobel prize in economics, and the former senior economist at the World Bank and advisor to the Clinton Administration, has written an article in Atlantic monthly strongly advocating cancellationof Iraq's odious debts and establishing a process to handle the odious debts of other countries such as the Congo and Ethiopia.

Mario Cuomo, who was Governor of New York from 1982-1994, gave a lecture in Princton yestarday which, along with criticising the Bush Administration in many ways, said about Iraq: "How do you become a liberator?" he asked. "Make them truly free," by forgiving foreign debt and working with the rest of the world to build a sound democratic structure.

"The people of Iraq have been saddled with a debt from a brutal regime that went through 30 years of neglect and was more interested in building palaces than building the infrastructure," said White House spokesman Scott McClellan.

Iraq's interim trade minister Ali Abdul-Amir Allawi said today in Singapore that "the debts of Iraq were incurred by a brutal authoritarian, dictatorial regime mainly to fund all types of illicit activities, like wars of aggression." He said Iraq would be looking for a bigger write-off than Egypt and Poland, which he said had around 65-70%of their debt forgiven. Because of Mr. Allawi's travels in Asia Jubilee Iraq has been unable to consult with him, although we did meet with the deputy trade minister last week who emphasised how devastating heavy debt service would be for Iraq's trading prospects, as well as agreeing with the odious nature of much of the debt.

Rep. Todd Tiahrt, who sits on the US House Appropriations Committee, which cleared the spending bill for Iraq by a 47-14 vote (it goes to the floor of the house next week), was convinced of the need by a visit to Iraq. Some officials want to make the $20bn in reconstruction money into a new loan, such as Rep. John Culberson (R-Texas). But Tiahrt disagreed. He said that would send mixed messages to nations about helping the United States pay for reconstruction. He pointed out that Iraq already owes huge debts and reparations [around $200bn]. "[the creditors] made an agreement with a dictator, and it was a bad investment, and they ought to take their lumps," Tiahrt said. "Well, if they're going to take their lumps for $100 billion, it's a little bit two-faced of us to say, `You have to forgive your money, but we're going to recover ours. In order to be consistent and give the people of Iraq a chance to get their economy going, we ought to use it as a grant, or in some way get leverage to get the other debt forgiven."

The London Evening Standard reports that Hyundai's debt claim composes $779m in outstanding construction bills and $325 million in unpaid interest. Hyundai is trying to create a so-called "Washington Club", an international body of private creditors owed money for work previously done in Iraq. This group, comprising about 20 corporate creditors from eight countries, is expected to be set up by the end of the year. Hyundai says nine Korean corporate creditors, with outstanding bills totaling $1.7 billion, have indicated their intent to join the negotiating group, including Samsung Engineering and Construction, LG International and Hanjin Heavy Industries Construction. Meetings are taking places this week with Japanese companies, and meetings with European companies are in the works.

Ro In-Shik, general manager of Hyundai's overseas-contract department, said:"The recent war in Iraq and the regime change have opened the path for Iraq to normalize relations with its external creditors, including other governments, banks and companies." Senior executive vice president Kim Ho-yung said: "We are 100% confident that Hyundai will eventually redeem all of its outstanding income from Iraq. The first visible outcome will be seen by the end of the first quarter of 2004." Hyundai's lawyers, are US law firm Akin Gump.

Hyundai has recently beefed up its presence in Iraq with a special task force and hopes to gain from US-sponsored reconstruction contracts in the country. It is focusing on basic infrastructure work such as electricity and roads as well as repair projects at damaged oil facilities.

Prince Sa'ud al-Faysal, the minister of foreign affairs, said during his periodical press conference in Riyadh on Wednesday that press reports indicating that Saudi Arabia had written off Iraqi debts were false.

The KDP newspaper Khabat reported on 8 October that during his visit to Kuwait, Barzani said in a news conference that the Iraqi people were not responsible for the crimes committed by Saddam and the Iraqis should not be blamed for his crimes. Regarding the repayment of Iraqi debts to Kuwait and Saudi Arabia, he said: "This is not an important issue, we can easily agree on it... We support the rights of our brothers in Kuwait and Saudi Arabia and know that the former regime did something very wrong against them. However, it must be made clear that the Iraqi people are not responsible for the regime's crimes." There seems to be some ambiguity in this statement, at least in the fragment of it translated by the BBC monitoring service. We will attempt to clarify the KDP position when we meet with them next week.

South Korea's biggest engineering firm, Hyundai Engineering and Construction, is planning to sue Iraq for close to $1bn in unpaid bills for work done on 16 construction projects in Iraq before 1991. The company says it is owed $1.1bn (including interest), and is hoping to use the British courts to claim $860m under rules set up following the Gulf War. "We will file a lawsuit in London following the establishment of diplomatic ties between Britain and Iraq, which is expected to come before the end of this year" the company said in a statement. The company said a recent US court decision allowing it to claim $70m in unpaid revenue strengthened its case. It is currently trying to get about 20 other firms from a number of nations to present a united front, and is visiting Japan this week with its US legal advisor.

Minister of Planning Mehdi Hafedh told a news conference in Sweden, which he is visiting in preparation for the Madrid donor conference, that Iraqi debt "will be discussed in the Paris Club of creditors. We are preparing ourselves to provide some documents and some comments about the claims made by certain countries and institutions. There is no definite number about the debt...this has to be documented and discussed by the Paris Club in the near future." He said debt would not be on the agenda of the October 23-24 conference in Madrid.

Jubilee Iraq had hoped to meet with Dr Hafedh in Baghdad, but unfortunately he is likely to be in Europe for the entirety of our 3 week consultation in Iraq.

A report leaked from the Institute of International Finance, which represents 330 of the world's leading commercial banks,suggests that even in the best case senario, including cancellation of debt which it estimates at $134bn, Iraq will remain poor "because oil will not fund public spending, aid will fall short of what is needed and few companies will want to invest there." It predicts GDP/capital will not exceed $3500 for 10-15 years. In the 1970s it was $7000, and Saudi Arabic today is about $9000.

"As for Iraqi debt to many countries and to Russia, of course we understand that writing off the debts would help to clear the ground for restoration of Iraq. You know, Russia is not a wealthy country and nobody forgives us our debts. During the last 10 years we heard many promises of $40 billion credits on good terms or to write off our debts. We are constantly deceived. We pay old Soviet Union debts, though it is not clear why we have to. I would never have agreed to it, but the previous leadership agreed, made that decision and we fulfill these stupid obligations to pay for all the former republics of the Soviet Union. Russia is not a rich country, but as for writing off the debts of the poorest countries of the world, in absolute figures, I think we hold second or third place among all developed countries - I think after France and Japan. More than the United States. Iraq, in terms of its parameters - its potential - is not among the poorest countries of the world. It belongs to the countries in the middle. And it is capable of paying its debts.

The problem is to restore the country, its stability. The country will be able to pay its debts without large injections, but we understand the unique character of Iraq's situation today. And we stand ready to consider within the frameworks of the Paris Club the possibility of partial debt relief. But we can do that only jointly with other Iraqi creditors. We cannot go it alone. It should be on the basis of coordination and it should be a good concentrated decision." (Saturday, 5 Oct)

Jubilee Iraq wrote the editorial for this week's edition of Iraq's leading english language newspaper Iraq Today. Sign up for their free 2 week subscription to read our editorial online, along with Iraq Today's many excellent reports.

Ed Feulner, President of the influencial conservate US think tank the Heritage Foundation, in response to debate in Congress on whether to make reconstruction funds into loans instead of grants, warned yestarday, that "heavy debt repayments could become a destabilizing political issue in postwar Iraq... The onerous debt repayment schedule imposed on Germany after World War I contributed to that country's financial collapse in the 1930s and paved the way for the rise of the Nazi Party."

The first week of the consultation tour has already made clear that Iraqis across the political spectrum are very passionate on the issue of debt. We have met Islamic parties such as Al Da'wa and the Iraqi Islamic Party, Kurdish parties such as the Patriotic Union of Kurdistan and the Kurdish Islamic Union, secular parties such as the Iraqi National Accord and the Iraqi Communist Party, religious leaders such as Sheikh Moyaad of the Abu Khanifa Shrine, civil society groups such as the Women's Freedom Organisation and student groups such as the Iraq Prospect Organisation.

They have all emphasised the depth of Iraqi suffering under Saddam's regime, particularly during the wars. It astounds them that countries which financed Saddam, supplying him with cash, goods and weapons during the Iran-Iraq war, can have the hubris to assert that Iraqis should pay them. On the contrary, some have told us, if there is justice in the world then the countries which supported Saddam should be paying compensation to Iraqis. One of Iraq's leading Sunni clerics told us that the longest verse in the Qu'ran concerns debt justice, and quoted an old Arabic proverb "When a camel falls to the ground, the knives are many." Camel's were killed first by slitting the throat and then sliced up in many places. Iraq is the camel he said. It is wounded and down on the ground, and the countries claiming debt and reparations are like the assailants with knives.

We are contactable in Iraq by satalite phone (connection variable!) +88 216 5201 1417 and by email mail [at] jubileeiraq.org

World Bank needs assessment, combined with CPA estimates, total $55bn for 2004-7

With Senate momentum building to alter the Iraq reconstruction package, House Republican leaders today indicated they are open to changes and are exploring ways to balance members' concerns with the Bush administration's goal of not driving Iraq further into debt. Following the weekly House Republican Conference meeting, Majority Whip Blunt said that while members are concerned that U.S. taxpayers are being asked to foot a hefty bill, they are more concerned about existing foreign loans made to the Saddam Hussein regime. Republican Conference Chairwoman Deborah Pryce of Ohio later said members fear Iraq would use the U.S. loan money to repay its $200 billion in debts to countries such as France, Saudi Arabia and Russia. Blunt said the Republican Conference and GOP leaders want to help President Bush challenge foreign governments that lent money to the Hussein regime to not stick those bills to the new Iraqi government. "I think what the leaders would like to see -- what I would like to see -- is a debt-free Iraq."

Blunt said House Appropriations Chairman Young would include a provision in his bill prohibiting any oil revenues from going to repay debt to nations that lent Saddam money. A similar provision is in the Senate bill. Young and Defense Appropriations Subcommittee Chairman Jerry Lewis, R-Calif., are opposed to making the reconstruction funds into a loan, as are House GOP leaders and key Democrats like Rep. Norman Dicks of Washington. A House Democratic aide noted support is building in that chamber for a loan, but added that if successful, "It'll be a 'pay us back someday' kind of thing."

Blunt said House leaders would consider making the $20.3 billion request into a loan or loan guarantee program if it were tied to forgiveness of Iraq's prior loan obligations. "That may not be the course we take in the House," Blunt said, but he added that GOP leaders would be open to discussions in conference with the Senate about some form of loan program in lieu of direct aid. Blunt later hinted that any acceptance of loan language might be cosmetic at best, aimed more at attracting votes than a strict timetable for Iraqi debt repayment. He said leaders would be open to the idea "if it was beneficial for us to characterize" the Iraq reconstruction funds as a loan or loan guarantee.

Also today, House Republican Policy Committee Chairman Christopher Cox of California and Ahmed Chalabi, head of Iraq's Governing Council, told reporters a loan program was the wrong option. Chalabi said it would be "immoral to ask the people of Iraq to repay the money that was lent to Saddam" and was used to commit atrocities against his own people. "The people who financed" Saddam's regime "ought not to have a return on their investments," Cox added.

Russian Deputy Foreign Minister Aleksandr Saltanov, who was taking part in an international conference on aid for Africa, which ended today in Tokyo, said about Iraqi debt: "Of course, we proceed from the premise that this problem needs to be addressed in such a way that, first and foremost, no damage is done to Russia," he said, noting that this sort of approach "coincides with the position of a whole series of states who are Iraq's creditors".

The Financial Times reports that the United Arab Emirates is calling on its Gulf neighbours to contribute generously to Iraqi reconstruction at this month's Madrid conference, arguing that it would accelerate the departure of US troops.

Saudi Arabia is "willing to offer only a combination of a rescheduling and forgiveness of Iraqi debt and to provide new loans through the Saudi Development Bank." According to an unnamed Gulf official. Kuwait is still seeking reparations. Nasser Saneh, head of the Kuwaiti-American parliamentary friendship commission, was quoted in the pan-Arab Al-Hayat newspaper as saying "As I remember, the last person before Bremer to call on Kuwait to forgo the debt was Saddam Hussein."

Seperately, the Asharq Al-Awsat newspaper reported that The Arab Investment Company (TAIC) decided to classify the Iraqi debts to the company as "suspended" debts. The company considers Iraq as a country, which is capable of paying its debts, once the Iraqi economy recovers from its current economic crisis. The company estimated these debts at $50 million. These debts include loans, which were provided mainly to Iraq Central Bank, Al-Rafdin Bank and some other governmental agencies. The company added that it has several alternatives to collect the Iraqi debts including compromises and selling these debts.

Senator Evan Bayh (Democrat - Indiana) said in a conference call with journalists that he plans to offer an amendment to President Bush's $87 billion request that would make the $20bn reconstruction money a grant, rather than a loan, only if other countries forgive their old Iraqi debts. Bayh said if other countries are not filling to forgive debts incurred by Saddam Hussein's government, then the United States should be paid back first. "This legislation will make sure that American taxpayers are helping rebuild Iraq, not refill a foreign bank account."