March 31, 2004

The UAE daily Gulf News argues in today's editoral "There is something deeply unsettling about the issue of Iraq's debt... And it is known from bitter experience, democracy was strangled in Germany in no small part due to the massive debt the country had to pay off after 1918. Unless this debt burden is significantly reduced or better still eliminated, Iraq will find it impossible to undertake its responsibilities to its own citizens and the international community. The region and the world will have nothing to gain by impoverishing the Iraqi people at the very moment they expect and deserve their fortunes to improve."

March 30, 2004

The British International Development Secretary, Hilary Benn MP, today avoided addressing the issue of Saddam's debts. He was speaking at a meeting of the think-tank IPPR on the subject of "Rebuilding Iraq - winning the peace", having just returned from a trip to Basra.

He mentioned in his talked that Saddam's debt is around 6-9 times GNP, while GDP per capita is just $500 and unemployment is 50%. However he didn't explain what the British government intended to do.

Jubilee Iraq's Justin Alexander pointed out that even if the Paris Club persuades all creditors to reduce claims by 2/3rds (which is unlikely, since even Paris Club host France yestarday said it supported only at 50% reduction) Iraq will be faced with a debt burden greater than Argentina which is currently facing an economic crisis as a result of debt. He asked Mr.Benn to explain to the Iraqi people - many of whom have told us that the loans were made without their consent and not spent to their benefit - why they should repay Britain for its financing of Saddam during the Iran-Iraq war.

Mr.Benn refused to address the question. This is despite the ironic fact that he personally addressed the Jubilee Debt Campaign annual conference last Saturday, where he praised debt campaigners for their work and told them to continue questioning and pressing the government.

Mikhail Margelov, chairman of the Russian Council's International Relations Committee said today that Russia's creditors should take reciprocal steps in response to Russia's agreement to partipate in the restructuring of Saddam's debts and/or that Russia should get investment projects in Iraq as a quid-pro-quo.

"Investments and Iraq's revival have once again brought up the issue of the country's debts. Russia cannot afford to pursue the approaches to restructuring foreign countries' debts it used in the 1990s if there are no reciprocal steps on the part of the creditors of Russia. The debt problem can be tackled only by taking into account the prospects this country or another has for participating in large-scale investment projects in Iraq." [interfax]

Jubilee Iraq notes that Russia's foreign debt is about 30% GDP and 120% exports, whereas the total of Saddam's debt and reparations is around 900% GDP and 1500% export earnings. So the scale of Saddam's debt is much greater. The similarity is that some of the Russian debt dates from the Soviet era and may have odious origins.

March 29, 2004

Reuters reports that France & Germany favour only a 50% reduction in the debt from loans they made to Saddam. This is considerably below the 65% previously mentioned by Russia and the World Bank - an amount which Jubilee Iraq argues is anyway insufficient. The article also mentions that deadline for the long long awaited IMF report on the debt will not appear until May, not at the Spring meeting in April as expected: "The IMF is finding it harder than expected to come up with a calculation of what could be considered a bearable level of debt for Iraq."

The renounced Iraqi economist Abbas Al-Nasawi, Professor at Vermont University, has a new paper "Iraq's Odious Debt: Where Do We Go from Here?" in the Middle East Economic Survey.

He argues that "the bulk of this [debt] should be declared odious and the people of Iraq should not be required to repay it...most of the loans were used to pay for imported weapons, ordnances and other war material... Lenders were providing loans not to help with economic development but to shore up a government which had a long history of violating its citizens' human rights, compounded by the fact that it was waging a long war with its neighbor."

“Our priority is to project our lawful interests” Russian Foreign Minister referring to Russia's intention to extract Saddam's debts from the Iraqi people (Dow Jones).

An unnamed coalition diplomat says “regime chance in Iraq” is not to be seen as a “money grab… if the focus is on reconstruction and stability, you are going to make sure that an emerging government is not hobbled by debt.” (Dow Jones)

The Observer today quotes Jubilee Iraq's Justin Alexander: "Even with the best deal rich countries are likely to offer Iraq, its debt [service] will still exceed the country's health and education budget and will devastate a country that is desperately poor and in danger of civil war. Quite apart from the injustice of requiring Iraqis to pay debts incurred by Saddam it is economically crazy to expect the repayment of so much because it will send the country into a tailspin." Our calculation assumes that the debt is reduced to $45bn (excluding reparations) and paid over a 20yr period. In which case, depending on the interest rate, debt payments will be at least 2-3 times the combined health & education budget (which is about $1.5bn for 2004).

In an excellent article, Alex Lefebvre summarises some of the shady history of the US loans to Saddam and the BNL scandal, involving many people connected to the current US Administration. It is amazing that this all seems to have been forgotten, and in all of the 4000 articles on Iraqi debt in US paper over the last year, the history has hardly been mentioned at all. Here are some highlights from the article:

"The CCC loaned about $5 billion to cover Iraq's purchases from 1983 to 1990, in a curve whose trajectory broadly matches the US government's support for the Hussein regime... Agriculture Department investigators in the late 1980s discovered that the unusually high profits obtained through CCC-backed sales were being used to fund "after-sales" services to Iraq (such as the provision of armored vehicles, communications equipment, and other goods with military uses) and kickbacks to Iraqi officials. The CCC program in Iraq was conducted despite objections from US Treasury and Federal Reserve officials, who consistently called throughout 1987-1990 for eliminating or scaling down the program, based on Iraq's likely inability to repay the loans. However, the State Department repeatedly intervened to push the credits through on the basis of an appeal to US interests."

"These interventions continued even after Banco Nazionale del Lavoro (BNL) scandal, directly implicating the CCC in funding the Iraqi war machine, broke in 1989. Over the course of the 1980s, BNL, at the initiative of its Atlanta branch manager, Christopher Drogoul, became one of Iraq's major financers. Largely owned by the Italian government, BNL enjoyed an excellent credit rating, allowing it to make large loans to the Iraqi government. According to a 1992 investigation by US Representative Henry Gonzalez, BNL loaned Iraq around $4 billion during the 1980s. According to a May 21, 1990 US Department of Agriculture report, of these $4 billion in loans, over $2 billion were "greybook" loans, i.e., illegal loans secretly made and kept off BNL's public records. These loans were hidden both from US banking authorities and BNL officials in Rome. Drogoul and other Atlanta officials also took some of the money for themselves. A key political aspect of this situation was that roughly $750 million of the $2 billion loaned "off-book" to Iraq actually consisted of credit guarantees from the Agriculture Department's CCC program."

"Particularly explosive was the fact that about $2 billion of the total BNL loans were made to Iraq's Ministry of Industry and Military Industrialization (MIMI), headed by Hussein's son-in-law, Hussein Kamel. MIMI oversaw a variety of programs, civilian and military, including Iraq's nuclear and chemical weapons programs. BNL helped the Iraqi government finance its acquisition and development of Matrix Churchill Limited (MCL), a British military toolmaker, and Matrix Churchill Corp. (MCC), its US branch. According to a Federation of American Scientists report, the Iraqi government sought to use its acquisition of MCL/MCC to learn about the use of glass fibers and carbon in nuclear missile design."

"There is a massive amount of evidence demonstrating that the activities of BNL were carried out with the full knowledge of high-level officials in the American government, and that when the scandal broke, a cover-up was engineered. During the early 1990s, as the story emerged, it became clear, according to a 1992 piece by Washington Post columnist Jim Hoagland, that then-president George Bush "is tolerating a cover-up on Iraq conducted by others on his behalf...That Bush has lied about his knowledge of shipments of US arms to Iraq can no longer be seriously doubted." The $1 billion approved in 1989 came after a top-secret National Security Decision Directive signed by Bush that ordered closer ties with Iraq. In October of that year, Secretary of State James Baker intervened personally to ensure the continuation of the CCC loan guarantees. According to BNL bankers, companies seeking to do business with Iraq were directed to BNL by then-vice president Dan Quayle, who, according to reports published in the early 1990s, had close personal ties with one of the companies involved in the scandal. Moreover, BNL was advised in its operations by Kissinger Associates, the consulting firm headed by the Nixon-era secretary of state, Henry Kissinger... In spite of these high-level connections, only Drogoul and several other officials were indicted and convicted for their involvement in the scandal. The judge who oversaw the case, Marvin Shoob, said, "I've read all the secret documents, and I can't believe [Drogoul] was the sole actor or principal actor in the enterprise." The sentences of Drogoul and the others were reduced in light of "US and Italian policy" in favor of Iraq during the Iran-Iraq war, which the judge felt lessened their responsibility."

March 28, 2004

The APF writes that Kuwait "agreed in January to substantially cut the estimated $16-billion debt owed to it by Iraq. Nonetheless, Kuwait has underlined its determination to seek tens of billions of dollars in war reparations from Baghdad. The parliament's legal committee unanimously approved a draft law in October that would forbid the Kuwaiti government from forgoing the reparations from Iraq. The full house is expected to vote on the bill shortly. If it passes it will be endorsed by Kuwait's emir to become a binding law." Khaled Al Mudhaf, head of Kuwait's compensation authority was quoted in the Al Qabas daily as saying "Kuwait has received $9.5bn in war reparations." He also said that the UNCC has recently awarded $200,000 to families of Kuwaiti prisoners found dead in mass graves in Iraq after they were captured by Saddam's forces during the 1990 invasion. It should be noted that the US pays about one-hundreth of this ($2000) in blood-money to families of Iraqi civilians killed by Coalition soldiers.

March 25, 2004

The IMF has been doing some soul searching following its role in the Argentine economic crisis. The Executive Directors of the fund admitted that the Fund's debt sustainability assessment was based on growth projections which "were, in hindsight, too optimistic, leading to too complacent a view of Argentina's fiscal performance."

The IMF is expected to publish a debt sustainability analysis for Iraq next month - and Jubilee Iraq expects that they will once again make damaging mistakes in their economic analysis.

March 18, 2004

Today Jubilee Iraq was in Vienna today, hosted by the Green Party. Ahmed Jiyad (Iraq's debt negotiator from the 1980s) and Justin Alexander (UK Coordinator of JI) gave a press conference, spoke on local radio, strategised with Austrian NGOs and addressed a public meeting, including representatives from the Austrian export credit agency. (Photos and abstracts from the meeting) The Green Party (which holds about 10% of seats and is overtaking the far-right Freedom Party as Austria's third party) has introduced legislation supporting an odious debt arbitration tribunal for Iraq.

Speaking at the Economic Forum on Iraq in Lebanon, Minister of Planning Mahdi Al-Hafedh, said: "We might be poor today due to the past's legacy … an issue that greatly calls for the understanding and solidarity of the international community and our Arab brethren to participate in resolving these problems. The most important is the reduction or retirement of the country from foreign debts and reconsidering the war compensation payments in a reasonable and just manner that takes into consideration the crises our nation has endured."

March 17, 2004

The two day conference "Iraq and debt relief: A case for the Odious Debt Doctrine?" has sucessfully drawn to a close, in spite of being boycotted by James Baker and other US officials. 80 participants came from Canada, Uganda, UAE, Iraq and across Europe. More information from the event will be posted here soon.

Dr Harlan Ullman, the former professor of strategy at the National War College in Washington and advisor to John Kerry, told the Australian Broadcasting Corporation that "I'm very concerned about the peace in Iraq for at least three reasons" which "if I were Mr Bush I'd be pushing a lot faster and a lot firmer":

"Thirdly, and what I find most interesting and perhaps most discouraging is that, if we are to attract foreign investment into Iraq, we must deal with Iraq's debt. Unless we can deal with that debt and resolve that issue, we are not going to get external investment, which we really need... If we do that, then I think the possibility for transitioning Iraq to a more stable, prosperous society will be a lot better, and I think that will be very helpful in defeating the larger aim of the terrorist."

March 16, 2004

In interview with Reuters in Beiruit, Kamel Al-Gailani said he hoped to finalise a deal to ease the debts this year, despite splits among creditors over how much debt relief to grant. "The world saw what happened in Iraq: 35 years of damage. Iraq is a rich country, but to return to the international community as soon as possible we need a substantial reduction." He declined to say how much.

Gailani said Iraq would soon finish gathering data on its debts, much of it lost or destroyed in post-war looting. "I think in the near future the next step will be bilateral meetings with the Paris Club to exchange this information to see if it is identical with the creditors or not. We are thinking to finalise everything in 2004."

Gailani, Sinan al-Shibibi and other top finance officials were meeting with an IMF team in Beirut to discuss the debt.

The CPA has appointed accountants Ernst & Young to help trace Iraq's loan contracts and reconcile who is owed what. Speaking anonymously, an official told Reuters that Iraqis have been unable to trace loan agreements, especially controversial deals with Gulf Arab states such as Saudi Arabia, which the Iraqis say were grant aid rather than loans. "The Iraqis' loan figures are all mixed up between public debt and private debt; they do not have any paper trace. They say they cannot accept figures without a paper trail."

The contract is worth $13.2m for Ernst & Young.

David Chance of Reuters, interviewing German officials at the Friedrich Ebert Foundation conference, writes that: "A deal to reduce Iraq's huge debt burden is being hindered by disagreement over whether Iraq's debts to Saudi Arabia should be classified as loans or as grant aid. They said the unwillingness of Iraqi officials to deal with the Saudi issue was compounding the problem and U.S. pressure may be needed to secure a deal on the debts, which the Saudis say are loans amounting to $24 billion plus $6 billion in oil."

"We are counting a lot on the influence of the U.S.. They will make the Iraqis come to the Saudis and participate in a compromise," one senior European Treasury said.

As regards a Paris Club deal, one official said: "This (G7) consensus was joined by some non-Paris Club creditors, but far from all. I expect it will take a little bit of time... I see it more in the last quarter [of 2004]."

A second Treasury official said: "The figures for non-Paris Club members are very provisional. Even the question of interest is not certain and I have seen figures submitted with interest and without interest. For the Gulf countries, there is no qualification of the debts and we are in a very unsafe area."
(Source: "Iraq debts to Saudi hinder debt reduction deal-source", Reuters, 16/3/4)

March 12, 2004

On 9-11th March the UN Compensation Compensations Commission met for its 51st session and added another $204m of reparations to the $48 billion it has previously awarded. Iraq has paid $1.45bn since the fall of Saddam, and will probably be expected to pay $40bn in total by the time the UNCC finishes assessing claims in 2005.

60 Iraqis demonstrated. We ranged in age from 2-80yrs old and came from Berlin, Geneva, Lausanne, London, Paris and Zurich to call for an end to the reparations. We gathered around the famous broken chair sculpture outside the Villa La Pelouse (the main UN building where the UNCC is based), with banners saying "Victims shouldn't pay reparations" and "Iraqis don't owe a dime for Saddam's crime."

We all signed a letter which we handed into the UNCC calling for an immediate moratorium on payments and an UN Security Council resolution to dissolve the UNCC and focus the energies of the UN in investigating Saddam's odious debts instead.

We will be demonstrating again in mid-June which the UNCC holds it's next session. Please start planning now to come and join us - flights are very cheap when booked in advance.

For those who read french or arabic, visit Ikbal Al Falluji's site "Le Droit International" for powerful arguments about the illegality of the UNCC, whose establishment exceeded the powers granted the Security Charter in Chapter 7 of the UN Charter.

March 09, 2004

The Friedrich Ebert Foundation is hosting an international conference on 16-17 March entitled "Iraq and debt relief: A case for the odious debt doctrine?" featuring Iraqi economists, European politicans, business people and NGOs including Jubilee Iraq. There is an introductory paper "Odious debts - Odious creditors?".

March 07, 2004

Interim Trade Minister Ali Allawi is interviewed by AME Info "The legacy of the Saddam regime is extremely burdensome. We are saddled with anywhere up to $150 billion of debt... A lot of the debt incurred in the past was a result of the regime's wars of aggression. We have been given reason to believe that a lot of it will be written off by those countries that financed Iraq's activities."

March 05, 2004

A new article Baker the Baliff? by Jubilee Iraq's Justin Alexander assesses James Baker's progress so far. Here are some extracts:

"James Baker has made significant progress in preparing the way for a Paris Club agreement on relieving Iraq of the obligation to repay some of Saddam's debt. More importantly, however, Baker has not yet addressed the view of Iraqis and many others that most of the debt claims are illegitimate. If the Bush administration is genuinely committed to empowering Iraqis to build a peaceful, prosperous and democratic nation, then it should unconditionally write off American-held debt and reparations claims. Bush should further instruct his special envoy to work alongside Iraqis for a just solution to the debt and reparations problem. The fairest way forward would be transparent international arbitration -- an “odious debt” tribunal -- to determine which loans benefited the Iraqi people and which merely underwrote the wars and domestic repression of Saddam Hussein's regime.

Why is the US not promoting this approach? A cynic might suspect that Washington is embarrassed about how the administrations of Reagan and the elder George Bush backed Saddam until 1990. Perhaps the White House would rather not remind anyone of Baker's $1 billion pledge to Tariq Aziz. A cynic might further surmise that an Iraq with a reduced, but nonetheless significant, burden of debt will be dependent on foreign aid, presumably much of it from Washington. With his eye on US basing rights, the younger Bush may prefer a weak, indebted Iraq that it can control to a debt-free Iraq which could stand on its own two feet. To prove the cynics wrong, Bush and Baker will have to deliver much more than a Paris Club deal that reinforces the status quo."

March 04, 2004

Without saying where it obtained the information, the Nikkei English News reported that Japan is considering forgiving at least $3 billion of the $7 billion it claims from Iraq. The article noted that: "given that payments of the default penalties have been suspended for a long time, Japan has no choice but to give up that portion of the debt."

World Bank President James Wolfensohn, speaking to business students at Stanford University, said there is "a fair chance for debt relief" of up to $80-$90 billion, but he did not offer any details or timing. He has previously said that he believes most of Saddam's major government creditors are willing to forgive two-thirds of debt. (Reuters)

The Canadian ecumenical group Kairos argues that Iraq's Odious Debt Must be Eliminated, Not Rescheduled. "Since Canada is only offering debt relief through the Paris Club, the Martin government is complicit with US plans to tie debt relief to IMF-administered structural adjustment conditions then severely constraining any post-occupation government's economic policy options. Canada should write off the debt in its entirety independently of the Paris Club when a new democratic government is formed in Iraq. But Canada's responsibility does not end there as Canada must also contribute to the reparations owed to the people of Iraq."