UK Chancellor Gordon Brown made his first public comments on Iraqi debt today in response to a question asked by a Jubilee Iraq support David Stewart MP ("Loans to Saddam financed his wars, his palaces and the oppression of ordinary Iraqis. We must get rid of the millstone of Iraqi debt.")

Brown responded: "Iraq is the country with the second-largest reserves of oil in the world so it is potentially a very rich country indeed. It is also true however that the average income of the population is less than $500 a year – that is less than $2 a day. It is because of that that we need to take action to correct the position. The United Kingdom view is that the international community will have to write off the vast majority of Iraq’s debt to restore economic sustainability."

So unfortunately he avoided the key issue of whether the debt is legitimate, and only talked about reducing debt to a "sustainable" level, refering to a status quo processing of Iraq through the Paris Club, a mechanism which protects the interests of the creditors and will force Iraq to pay billions of dollars of debt service.

The Iraqi ministers Sinan Al Shabibi and Kamil Al Gailani will address G7 finance ministers at their Feb. 6-7 meeting in Florida. John Taylor said it has not been decided if Iraqi debt will be addressed because Baker is still involved in discussions with various countries.

Bulgarian News Agency BTA reports on meetings between Iraqi interim foreign minister Hoshyar Zebari and Bulgarian officials.

On 29th Jan National Assembly Chairman Ognyan Gerdzhikov said "Unfortunately, Bulgaria cannot afford to forgive the debt; I am sure that the appropriate formula will be found," Gerdzhikov said, pointing as an example the "petrol-for-debt" scheme. Zebari replied that this is a technical issue and voiced hope that experts of the two countries would consider all aspects of the issue and specify the debt. He gave assurances that Iraq will do its best to meet the international obligations it has taken.

On 30th Jan Deputy Prime Minister Plamen Panayotov and Finance Minister Milen Velchev, discussed debt. Zebari said "The new Iraq will be successor of all contracts and commitments taken by the previous governments of this country. We are ready to discuss with the Bulgarian side the possibilities for repayment of the debt in future periods," Zebari said although at the current stage it is very difficult for Iraq to settle any obligations because its debts total some $120bn.

Jubilee Iraq notes that Zebari was appointed by the US/IGC, may not be in his post after the July transition and has no authority to force the Iraqi people to assume Saddam's odious debts to Bulgaria or any other country.

To once again sell rice to Iraq, the US rice industry wants the government's help in forgiving Iraqi debt to the U.S. Department of Agriculture so trade can resume. The issue was the key topic at the annual meetings of rice trade groups in Brinkley this month.

The Gulf News reports that Iraq's debt to the Arab League's financial is about $420m. A source close to the AMF. "But I don't think the AMF is in a position to waive that debt. It might decide to slightly reduce the interest on the debt." The figure of $368.6m quotes a few days ago was the total for the end of 2001. The principal is 49.8m dinars ($201.7m) and the rest is interest.

Denmark claims 220m kroner (about $37m)] from 39 short-term export guarantees issued between 1979 and 1990, principally from three major transactions: 64.6m kroner to Cowi Consult in association with road building, 8.5m kroner to ATLAS Danmark concerning the export of refrigeration equipment and finally 5.4m kroner to FLS, which sold equipment for a cement factory.

Foreign Minister Per Stig Moeller states in a number of replies to Villy Soevndal of the Socialist People's Party and Soeren Soendergaard of the Unity List that he is "prepared to support the debt rescheduling conditions which are necessary for Iraq to have manageable debt. Denmark will waive Iraqi debt subject to the conditions on which agreement can be reached among the Western creditor states in the Paris Club". (report from Danish Radio via BBC Monitoring)

The "Big Conversation", is an attempt by the British government to listen to the public to rebuild an image tarnished by the Iraq war and domestic controversies. Please ask a question about Iraqi debt to Hilary Benn (International Development Minister) and Paul Boatang (Treaury Minister).

Here is a draft question you can use or adapt:

"The Paris Club, spearheaded by US special envoy James Baker, is preparing to "restructure" the $130bn Iraqi debt. But why should the Iraqi people repay any of the loans made by Margret Thatcher's government which financed Saddam during the Iran-Iraq war?"

click here to pose a question

Not a single newspaper has reported that on Thursday 22nd January Iraq was forced to pay another US$184,568,674.54 in reparations, with about $120m going to Kuwait, $5.5m to the US $3.6m to Britain and the rest to 21 other countries. This brings the total Iraq has paid so far in reparations to $18.2bn. As it happens James Baker was in Kuwait at the time showing "understanding of Kuwait's position on war reparations" according to Foreign Minister Sheikh Mohammad al-Sabah.

Amounts dispersed in the last year are:

$184.6m – 22nd Jan 2004
$196.2m – 16th Oct 2003
$190.4m – 17th July 2003
$863.7m - 8th April 2003

This is clearly far more than cap on reparations of 5% of oil revenues in Security Council Resolution 1483. The resolution was passed on the 22nd of May, so the 8th April payment, although coming after the effective fall of Saddam's regime, was before the change in rules. However, even excluding this payment, the implied annualised payment for the four quarters after 1483 was passed is $761.6m (more than the total of grants to Iraq in this period from non-US donors). This would only fit within the 5% cap if oil revenues for this period total $15.2bn – about double the reality.

The UNCC is paying out more than 5% because 1483 concerns new funds going into the Compensation Fund, rather than disbursements from it. There is clearly additional reserves in the Fund which are being disbursed. So the UNCC is not violating the letter of 1483, but it is violating the spirit of it. The exisiting money in the Compensation Fund, as well as current oild revenues, is Iraqi money which should be used for the immediate relief of the Iraqi people and the rebuilding of the country not to compensate for losses incurred 14 years ago which are rightly the responsibility of Saddam not the Iraqi people.

Jubilee Iraq condemns the continuation of these payments - the Iraqi people should not be forced to pay any more for Saddam's crimes. We will be demonstrating at the next UNCC meeting in Geneva on 10th March. Please contact us if you would like to participate or cover this story.

Reuters interviewed Romania's Foreign Ministry spokesman Cosmin Dobran and Bulgarian Finance Minister Milen Velchev today. Velchev said "It is an issue of high economic and political importance to us and we would like to get back a maximum amount of the debt even if it is rescheduled for a longer period." Dobran said "We will not give up the debt, but we are open to discuss ways to reschedule it."

In the 1970s and 1980s, under communist dictator Nicolae Ceausescu, Iraq was Romania's eighth largest trading partner, with thousands of Romanian workers and engineers sent to Iraq to work at construction sites, power plants and refineries. Foreign Minister Mircea Geoana said recently that Romania would consider taking stakes in various businesses in Iraq or any other options to have Iraqi dues repaid.

Dow Jones reports that while the Qatari government says it's owed $4 billion by Iraq, Mohamed Moabi, executive manager for economics and planning at Qatar National Bank, said the principal on the loans was only $1 billion, with the rest representing accrued interest.

In a speech at the Center for Strategic and International Studies yestarday, James Baker said:

One of his main challenges will be "in reconciling the numbers and in dealing with differences of opinion between Iraq and some creditor countries as to whether some loans were really grants."

"We are dealing with a postconflict economy after 10 years of sanctions, three wars, and over three decades of dictatorship and misrule. The debt-to-GDP ratio is an estimated 600 percent or more. Iraq's debts can never be paid in full, even under the most optimistic scenarios. Efforts to enforce the claims would ruin the Iraqi economy and, with it, any hopes for the Iraqi experiment with freedom and self-government."

"So how much overall reduction is necessary? All we can say with certainty is that it must be very, very substantial. It would be a mistake at this stage for the debate to revolve around specific percentages. Why? Because the exact size of the reductions is the most difficult issue, and you cannot put it up front if you want to have any hope for diplomatic progress."

"And also, the decision about how much to reduce the debt depends very much on the not-yet-completed technical determinations of “sustainability,” in other words, how much old debt a reconstructed Iraq could bear." Jubilee Iraq notes that the question is phrased "could bear" not "should bear".

"What I have asked of the major creditor countries in Europe, Asia, and the Persian Gulf region is agreement on three principles. First, that Iraq cannot be reconstructed successfully without debt reduction. Second, that any reduction must be substantial, or a vast majority of the total debt. And third, that we must begin now to have any chance to complete the project in 2004."

"For the record, the scope of my portfolio for this project is limited. My job is to deal with Iraqi debt to sovereign creditors, not with war reparations or private debt."

Mikhail Margelov, the Chairman of the Federation Council’s International Committee told Itar-Tass that he discussed a Russian parliamentary delegation to Iraq with Iraqi interim Foreign Minister Hushyar Zibari in Davos on Saturday. Margelov said "It would be reasonable to exchange some of the Iraqi debts to Russia forthe resumption of Russian-Iraqi contracts primarily the Lukoil development of oil fields.,"

Bulgarian news agency BTA reports that Finance Minister Milen Velchev and Economy Minister Lidiya Shuleva discussed the issue of the Iraqi debt with Russian Deputy Prime Minister and Finance Minister Aleksey Kudrin in the sidelines of the World Economic Forum in Davos. The two delegations were unanimous that when settling this issue, the creditors interests should be taken into consideration, as well as the fact that the Iraqi economy has a potential to export oil in the future, so the debts should be rescheduled over a longer period of time. The interests of Russia and Bulgaria are in the same line in terms of repayment of a maximum possible amount of the Iraqi debt, Velchev said after the meeting.

Prime Minister Paul Martin today announced at the World Economic Forum that Canada will participate in a Paris Club restructuring of Iraqi debt. Saying "Debt reduction is critical if we want the Iraqi people to have the opportunity to build a free, stable and prosperous country... Along with the other members of the G7 we have agreed to forgive the vast majority of Iraq's debt". The debt claim was quoted as being Can$750m ($380m principle + $370m interest), incurred between 1987 and 1990 to import wheat.

World Bank President James Wolfenson told CNBC at Davos that "I talked to [Baker] the other day. It looks as though most of the players are prepared to consider a write-off of 66%of the debt. He has not gotten contractual assurances but he seems reasonably confident that a Paris Club-type reconstruction is possible and that is an important first step for Iraq." Wolfensohn said even after this debt reduction Iraq would not be economically viable and about $52 billion was needed for reconstruction. Paris Club President Jean-Pierre Jouyet has said Iraq's needs would have to be assessed by the International Monetary Fund and that official authorities must be in place in Iraq to sign a debt-relief agreement. However, he has said he believes a deal can be reached by the end of 2004.

Crown Prince Abdullah, who is Deputy Premier, told the Baker that Saudi Arabia to "enter into negotiations with other principal Iraqi creditors to substantially reduce the Iraqi debt". Saudi Foreign Minister Prince Saud Al-Faisal stated: "The results of these negotiations would have to be endorsed by the internationally recognized Iraqi government, hopefully in 2004. What constitutes a substantial debt reduction is subject to agreement among the creditors."

Jubilee Iraq notes that the language talks about negotiations between creditors, to be endorsed by Iraq, rather than a process involving Iraq as an active participant.

Prime Minister Sheikh Sabah al-Ahmad al-Sabah says after meeting Baker that "The state of Kuwait is willing to begin negotiations regarding this issue on condition that the results of these talks are accepted by an internationally recognised Iraqi government." He insisted however that the reparations are a seperate issue. Kuwaiti Foreign Minister Sheikh Mohammad al-Sabah, who attended the meetings with Baker, later told reporters the US envoy "showed understanding of Kuwait's position on war reparations." Kuwait has filed compensation claims worth $170bn to the UNCC, which has already approved some $37bn in payments and has paid about $9bn to Kuwait. The figure quotes in many news sources for the Kuwait debt claim is $15-16bn.

Iraq is the biggest debtor to the Arab Monetary Fund, which claims $368.6m, reported Gulf News. This week the Iraqi interim Finance Minister is meeting AMF Chairman Jassim Al Manai.

The ITAR-TASS news agency reported that Putin met World Bank president James Wolfenson on tuesday, and discussed Iraqi debt, amoung other subjects. No further details.

The United Arab Emirates (UAE) and Qatar appear to have offered to drop most of their debt claims, though the details are not yet clear. The announcement came after talks between officials from the two Gulf states and US envoy James Baker.
The UAE is believed to claim about $3bn, and Qatar $4bn (this is the first time figures have been mentioned in public, Dow Jones quotes an anonyous UAE official putting the claim higher at $3.8bn).

"The UAE will waive most of Iraq's debts and is prepared, for this purpose, to start urgent negotiations over the matter so that the results of the talks are acceptable to the new Iraqi government," the state news agency WAM quoted Sheikh Khalifa.

"The state of Qatar will forgive most of the debts Iraq owes it and will consider waiving the remaining amount at a later, more appropriate time. Reducing debt in 2004 is a crucial and defining issue and provides Iraqi people a chance to build a free and prosperous country" a foreign ministry official told the state news agency QNA after a meeting between Crown Prince Sheikh Tamim bin Hamad bin Khalifa al-Thani and Baker.

It is important to note that these claims were (A) probably without any loan documents since they were originally structured as grants and (2) given to support Saddam in the Iran-Iraq war, and therefore clearly odious to the Iraqi people and therefore legally illegitimate.

Syrian President Basher Al Assad told Reuters that $200m in cash assets of the former government of Saddam Hussein would not be repatriate until Iraqi debts to Syrian firms were paid.

Jihad Al Khazen, writing in Saudi newspaper Dar Al Hayat, says "Most of Iraq's debts fall under what is called The Doctrine of Odious Debts, which means illegal."

Delegates at the World Social Forum in Mumbai, please come and participate in our workshop "Cancel Iraq's Illegitamate Debt" at 1-4pm on Sunday 18th in venue B67. You can contact us on 0044 7813 137171 (text message only) or email to justin [at] jubileeiraq [dot] org

Iraq's interim finance minister, Kamil Al-Gailani, said in a Reuter's interview on tuesday: "We urge countries to write off or reduce the debt significantly to ease off the burden so as to give Iraq a chance to rebuild and grow. We want to see a real willingness by all countries to help Iraq. Iraq is a rich country...there should be no fear for countries to reduce the debt or reschedule it. We are facing many obstacles and the debt is the first one. We didn't start from zero but below zero."

"The government has concluded that the money belongs to the companies and not to the state, therefore the debt cannot be cut,", said Zorica Jekic, a representative of the committee for economic relations with other countries in the Serbian Chamber of Commerce, talking to reporters in the Businessmen's Club. she said that the SCG Council of Ministers had taken that stand because those were commercial rather than the state's claims. "Iraq owes US$1.2 billion to companies from former Yugoslavia and not to the former country itself."

Victor T. Le Vine, professor emeritus of political science at Washington University in St. Louis, wrote in the St. Louis Post-Dispatch yesterday that:

Much of Baker's trip and negotiations appears to have been choreographed (or orchestrated) by the United States and the creditors to conceal an inconvenient fact: that Iraq may not owe anybody anything.

In International Law 101 you learn that only states contract debts abroad, and it is states that are responsible for them, regardless what government is in office. However, if a state disappears, its debts may be honored by successor states, if they choose to do so. If they do not, nobody pays.

But what about a state temporarily knocked out by war, or which changes radically in a revolution? In 1945 the defeated Nazi state was considered debellatio (KO'd by war) in international law, and when a new German state, the Federal Republic, emerged 10 years later in 1955, it didn't have to pay Nazi Germany's debts. And when the Tsarist Russian state was replaced by the Soviet state, the Soviets repudiated the Monarchy's debts, arguing that the revolution had wiped out both the Monarchy and its debts.

So it stands to reason why the United States and creditors all act as if whatever new state emerges in Iraq will automatically inherit the old state's debts, and in fact that's what Baker's trip affirms. But the facts are that the Saddamite/Baathist Iraqi state no longer exists, having been wiped out by war, and that there is no sovereign Iraqi state since the major decisions affecting the country are being made by the United States and the occupation administration of L. Paul Bremer.

If and when a new Iraqi state emerges and retakes sovereignty, and only then, can it decide what to do about its debts. Until then there is no Iraq with debts - Iraq is debellatio - and the elaborate charade played by the United States, Baker and the creditors barely conceals the fact that the future of the debt is very much in doubt.

An excellent article by Ken Guggenheim of the AP exposes James Baker's involvement with US department of agricultural loans to Iraq when he was Secretary of State under President Bush senior. There is an even bigger story lurking behind this that Jubilee Iraq will be leaking to the press shortly. Also see a letter from Baker and Iraqi Foreign Minister Tariq Aziz and a memo approved by Baker advising support for the loans.

Muhammad al-Najjar wrote in the Jordanian newspaper Al-Sabil today that a US team secretly visited Jordan (as well as Lebanon and others) at the end of last year to discuss the issue of frozen Iraqi funds and debt. A ranking Jordanian source denied to Al-Sabil that Jordan has promised the US team that it will return the $500m of Iraqi funds Jordan says it has. The government official also denied statements by the finance minister in the Iraqi Governing Council that a Jordanian-Iraqi agreement had been reached on settling the issue of the frozen funds. The government official said: Jordan has not changed the measures to administer the frozen Iraqi funds in accordance with the temporary law in this respect. The official added that the government hopes the House of Deputies will expedite the discussion of this law and introduce the amendments that the government recently asked for which consider the Jordanian government quarters as parties that have been harmed and therefore should get compensations from the frozen funds.

The source said that James Baker will visit Amman in the coming period. He said that this visit will be decisive with respect to the issue of the funds Iraq owes to Jordan and the frozen funds, adding that Jordan rejects any demand to return the frozen funds or cancel the debts Iraq owes to Jordan. Jordan claims about $1.25bn while the frozen sums amount to $500m, according to Jordan and $800m according to the Iraqi Governing Council.

Saudi newspaper Al-Yawm reported that Baker will visit Saudi Arabia tomorrow to meet with the Crown Prince and de facto ruler Prince Abdullah bin Abdul Aziz and the Foreign Minister Prince Saud al-Faisal. An earlier report from a Saudi government source said Baker was expected on the 7th Jan. The article stated that Saudi Arabia is claiming $24bn in cash and an additional $6bn in oil support.

Vladimír Špidla, the Prime Minister of the Czech Republic, said that his country is ready to write off one third of Iraq's 4 billion koruna ($157 million) debt. He added that almost all Iraq's debt to the Czech Republic was for military supplies and only 100 million koruna ($3.78 million dollars) for civilian exports. “It is in our interest to help Iraq so the situation there stabilizes,” he told Czech television late on Sunday. “Unless it does so, we will not see a single koruna.”

Romanian Foreign Minister Mircea Geoana told a news conference today: "The Iraqi debt to Romania is massive and it would be unacceptable to cancel it. We will however accept a rescheduling of this debt and are ready to discuss various formulas for compensation, such as credit lines or stakes in the capital of certain banks." Geoana said he hoped to discuss the issue soon with James Baker.

The G7 finance ministers will meet in Boca Raton, Florida, on 6-7 Feb, to prepare the agenda for the G7 meeting in Sea Island, Georgia this summer. The AP reports that Iraqi debt is likely to be at the top of the agenda.

The New York Times quotes an administration official on the question of whether the Gulf countries made grants or loans: "The paper trail is not what you would find in a normal government-to-government debt situation."

The paper seperately notes that James Baker has refused to translate the words "substantial" into percentages of how much of Iraq's debt might be forgiven. In addition, the $116 billion does not count perhaps another $100 billion in war reparations sought by Kuwait and other countries.

Bush met James Baker on New Years Day at his Texas ranch, and announced that Baker will be visiting the Arab creditor countries in the new year.

Saddam Hussein has started "cooperating" and has told investigators the names of people who know where the money he stashed in foreign bank accounts is, according to Iyad Alawi. "Saddam has started to give information on money that has been looted from Iraq and deposited abroad." The IGC believes that Saddam hid as much as $40bn in accounts in Switzerland, Japan, Germany and other countries. Mr.Alawi's spokesman Ali Abdul Amir told the Guardian "He has given many important details. They include links between his regime and foreign politicians."

China will consider cutting Iraq’s debts or writing them off out of humanitarian concern, state radio quoted Chinese Premier Wen Jiabao as saying on Monday, after meeting with James Baker.

China says Iraq owes it at least $1.1 billion — much of it for work by two state-owned construction companies before the 1990 Gulf War — though the total isn't clear. The state newspaper China Daily has put the figure at "several billion" dollars.

The Council on Foreign Relations now has an excellent summary page on debt as part of it's extensive background material on Iraq.