July 31, 2004

John Kerry's website manifesto on Iraq includes a brief statement: "Plan for Iraq's Future by working with our allies to forgive Iraq's multi-billion dollar debts."

This is fleshed out in his 4th July Washington Post op-ed: "On the economic front, that means giving [our allies] fair access to the multibillion-dollar reconstruction contracts. It also means letting them be a part of putting Iraq's profitable oil industry back together. In return, they must forgive Hussein's multibillion-dollar debts to their countries and pay their fair share of the reconstruction bill."

Jubilee Iraq urges Senator Kerry to make a clear committment to the complete and unconditional cancellation of all odious debt.

Foreign Minister Hoshyar Zebari is holding talks in Russia. Russian media agency WPS had an article entitled "Baghdad's hand extended to Moscow with a proposal to exchange debts for contracts." This seems to be a reiteration of the longstanding Russia position that it will partially reduce debt in the Paris Club providing Iraq honours contracts signed by Saddam, particularly for oil field development.

WPS writes "Our source says that under favorable circumstances Moscow is ready to write off over 50% of Baghdad's debt. However, to reduce the debt burden Iraq must, first of all, meet Russia halfway. In this connection Moscow implies that the new Iraqi authorities must resume contracts Russia had concluded in the era of Saddam Hussein."

Bargaining has already begun. According to Mr. Zebari, "an agreement was reached during the visit to appoint representatives of the Iraqi and Russian governments for inspection of all Russian contracts, concluded during the previous Iraqi regime, including the contracts in the framework of Oil in exchange for Food program. The Iraqi government will be respecting and fulfilling all contracts which are recognized valid during this inspection."

July 30, 2004

Extracts from a special report MEED reads on the debt:
"The restoration of Iraqi sovereignty may be a positive step in the rebirth of the nation - but for the economy it has reawakened the spectre of foreign debt and war reparations... Renegotiating this debt mountain is the key economic priority for the new government.

It notes that "A post-conflict aid package of up to $4,250 million [from the IMF]will have to wait until an agreement is reached with the [Paris] club of creditors on a structured relief package."

"Moscow is prepared to forgo a significant tranche of the debt only in return for concessions to Russian commercial interests, primarily in the oil sector. A key stumbling block to negotiations will be the status of a contract to develop the 650,000-barrel-a-day (b/d) West Qurna oil field signed by Russia's Lukoil in the early 1990s."

"Resolving Iraq's foreign debt burden will be the key dilemma for both the Baghdad government and its supporters in Washington in the coming months. Under the terms of UN Security Council resolution 1483, vital oil revenue deposited in the Development Fund for Iraq held in the US Federal Bank in New York is protected from foreign creditors. Before these funds can be transferred to the CBI, firm assurances on debt repayment and, more importantly, debt relief will have to be agreed"

July 29, 2004

Today the UNCC used Iraqi money to pay a further $177.5m in reparations, bringing the total paid by Iraq to date to $18.581bn. The payments included $1.4m to Britain, $2.6m to America, $1.2m to Canada and over $1m to various UN agencies.

July 28, 2004

A delegation including PM Iyad Allawi, Planning Minister Mahdi Hafidh and Central Bank Governor Sinan Shabibi visited Saudi Arabia today.

APF reports that, according to an anonymous source in the Iraqi delegation, the issue of debt was not raised in the meetings with Saudi officials. "General issues that were predominantly political were discussed during the meetings without going into details. We want to discuss the issue of debt but it is a matter that cannot be discussed during a two-day visit. We aim to write off all our debt, but it's a technical matter as much as it is political and it needs time."

Planning Minister Mahdi Hafidh told Reuters that Iraqi officials will travel to Kuwait next week and discuss the possibility of Kuwait waiving its debt claims.

July 27, 2004

In a surprise move, the Australian Greens have called on the Federal Government to pay grain growers AU$140m in unpaid debt left over from supplies to Iraq in the 1980s. The Greens' leader Bob Brown will take the issue to the Senate next week. He agrees the debt should be forgiven, but says farmers shouldn't have to bear the financial costs, up to AU$30,000 each, and he wants the federal government to pay up. The move has been welcomed by the Western Australian Farmers Federation.

July 26, 2004

Iranian Armed Forces cultural officer General Ali-Reza Afshar said that the Iranian Army has compiled a 1500-page report on the crimes Saddam Hussein committed against Iran during the 1980-1988 Iran-Iraq war. Afshar said that the US has not included the invasion of Iran in Saddam's trial because the US funded him during the war, and because if Saddam was found guilty of crimes against Iran, Iraq would have to pay reparations to Iran.

The latest scandal relating to Saddam's odious debt is coming out in the Netherlands. In 1985, Dutch company Melchemie exported base chemicals for the production of mustard gas to Iraq for the equivalent of around Euro1m (now Euro2m including interest). The Arnhem-based company was never paid by Saddam, and the debt was taken on by the Dutch government via export credit insurance. Melchemie was found guilty in 1987 of supplying four base mustard gas chemicals to Iraq. In March 1988, more than 4,000 Kurdish people were killed by a deadly gas in the Iraq city Halabja, but a direct link between the Melchemie-exported materials and the gas used has never been proven. According to the Finance Minister, the Netherlands has 41 accounts relating to Iraq, totalling $245m (Euro200m).

During Prime Minister Iyad Allawi's visit to Syria, the Syrian government said it would release assets frozen in its banks providing its debt claims were satisfied. Iraqi ministerial sources told Al-Hayat newspaper that Iraq presented documents about the existence of around $800m in Syrian banks, while Syria presented counterclaims for Syrian merchants and the government, including around $142m for the Transport Ministry, which Syrian Transport Minister Makram Ubayd said was a result of transactions conducted by the General Corporation for Railways and Syrian Airways with Iraqi companies.

Syrian Finance Minister Muhammad al-Husayn discussed this issue with Iraqi Minister of State Adnan al-Janabi, includes two Iraqi accounts in the Syrian government-owned banks. The ministerial sources noted that "the balance of the cash account exceeds $500m. The Iraqi side has the right to do what it wants with this account, given that it is the account-holder. The second is a commodity account with a balance of around $250m and is linked to reviewing the agreements and contracts for the supply of commodities to Iraq."

July 18, 2004

Iraqi Prime Minister Iyad Allawi will visit Kuwait on July 26-28, with debt forgiveness as one of the key issues on the talks agenda, the Kuwait Times reported. The paper quoted Allawi as saying that he will ask Arab states to forgive the debt. Allawi is currently on a Middle East tour visiting Egypt, Jordan, Kuwait, Syria and the United Arab Emirates.

Dutch Development Minister Agnes van Ardenne said in an answer to a parliamentary question it was not yet clear how much of Saddam's debt would be forgiven, saying more information was needed as to how much Iraq would be able to repay. She said the Netherlands is claiming Euro 245m ($302.6m) in export credit (larger than the $98m ex-interest claim tabulated by the Paris Club last July).

Iraq today raised $103m from domestic banks in its first domestic bond issue. The bonds are 91-day maturity and 6.8% interest. The government plans to hold twice-monthly auctions to raise as much as $1.2 billion by year-end. This month Iraq also made its first payment on domestic debt to banks since 1981, paying 507 billion dinars for three-month 6 percent-interest bills bought by banks under Saddam. Today's sale will help it repay another 600 billion dinars of debt that comes due on October 1, said deputy finance minister Aziz Jaafar Hassan.

July 15, 2004

Iraqi Finance Minister Adel Abdul Mahdi today proposed the formation of a ''joint Iraqi-Jordanian committee'' for resolving outstanding bilateral issues, including frozen Iraqi assets in Jordan and debt claims by Jordan, during a meeting with his Jordanian counterpart Mohammad Abu Hammour. He proposed the setting up of a joint panel ''that comprises representatives for several ministries in both countries in order to discuss outstanding bilateral issues as a single package and find speedy solutions for them''. $500m of Iraqi assets are frozen in Jordanian banks, and Abu Hammour said Iraq owes the Central Bank of Jordan about $1.3 billion of accumulated debt.

July 14, 2004

Adel Abdul Mahdi, Iraq's Finance Minister, told Gulf News on Monday: "We are asking for some major forgiveness, to wipe off at least 95 per cent of the debt or 100 per cent. We will have hard discussions with the IMF and the Paris Club in the coming months," he said. We are hoping that by the end of 2004, an agreement will be finalised in favour of Iraq and that the country will be cleared of the huge debt that according to Paris Club figures is about $120 billion."

July 12, 2004

IRNA reports that Iranian Judiciary Chief Ayatollah Mahmud Hashemi Shahrudi said that the court trying Saddam Hussein has no authority to order reparations for the damage inflicted on Iran and the Iranian nation. Addressing a group of judicial officials he said that the International Department of the Judiciary has established a special group to provide the court with evidence and do its best to defend the rights of all those suffering from Iran-Iraq war.

The LA Times reports that only about $1bn of the $13bn pledged to Iraq at Madrid last October has actually been given to the UN and World Bank funds established to manage it. Rend Rahim, Iraq's ambassador to the United States, said the aid "is much, much lower than what Iraq was promised.... We shouldn't be set adrift, on our own." She also told an audience at the American Enterprise Institute in Washington on June 29 that "so far, we do not have any serious pledges for the reduction of Iraqi debt." She criticized countries that have been unwilling to forgive more than a small portion of the debt, saying that the creditors "really want their pound of flesh."

"If 98% or 100% of the Iraqi debt is simply canceled, then it may be seen by other middle-income countries like Turkey as a kind of unfair treatment, in the sense that they also have a lot of debt and find it very difficult to live with that debt," World Bank Chief Economist Francois Bourguignon said at a press conference in Tokyo.

President al-Yawar was interviewed on Al-Sharqiyah in Baghdad, and asked:"Have you received any pledges during your visit to the United States that Iraq's debts will be scrapped?"

Answer "In fact, there were no official pledges... The French president promised they will work hard through the Paris Club to scrap about 50 per cent of our debts. We aspire for more than this... The ideal way to get rid of debts can be done in two ways. One is writing off the debts and we are working hard in this regard. This will largely relieve us of these debts. The other way is related to the reparations Iraq has to pay to many countries. We, of course, do not force these countries to give them up. There is a law and there are agreements we must respect even if they were signed by the former regime. We respect laws and regulations and would like to maintain good relations with the other countries. We will try to reach an understanding with our brothers and friends on the issue of reparations. We will be very grateful to them if they can help us. The countries must note that there is a process of rebuilding Iraq. We want priority to go to the Iraqi people and Iraqi firms, but international and foreign firms should play a supporting role and help us in this regard. We will take all this into consideration when we decide to open the door for work in Iraq."

July 09, 2004

Amir Taheri, writing in Saudi Arabia's english language Arab News, says: "The Arab part of the Iraqi debt consists of the money given to Iraq during the eight-year war against Iran. It would be both honorable and good politics to write off that debt. The Arab states do not need the money."

July 08, 2004

Australian Minister for Trade Mark Vaile met with 600 wheat growers to discuss the Government's decision to forgive the majority of Australia's debt claims on Iraq relating to wheat exports 1987-1990. Mr Vaile said that Iraq had no chance of repaying the debt, and the only option was debt forgiveness, which would be discussed at a meeting of major creditors later this year. He said "The most important thing is ensuring a future market for our wheat in Iraq," by investing $20m in wheat storage and handling facilities in Iraq..

Barry Haase, MP for Kalgoorlie, said before the meeting that "the debt forgiveness is something I was hopping mad about, until I realised there is a very strong commitment of $20 million for grain receival infrastructure, which at the end of the day is at least something which will cement our relationship with Iraq as a regular supplier... Whether it is sufficient for growers to forgive the debt is another matter, in reality the likelihood of that debt being repaid was a bit like hell freezing over."

Iraq's Finance Ministry is to auction 150bn dinars ($10m) of treasury bills on July 18. The T-bill issue will be used to repay outstanding domestic debt issued by the previous regime of Saddam Hussein, 1,300bn dinars ($100m) of which is estimated to be held by Iraqi banks.

"The ministry had to find a way to pay local banks back," said George Gianaris, a US Treasury Department official in Baghdad advising on Iraqi debt. "If it didn't roll over the debts the banking system would not be solvent."

FM Adil Abdel-Mahdi said he expected the T-Bills, which will have a 91-day maturity, to yield 5-8% annual interest - quite optimistic compared with other emerging debt markets. (report from Nicolas Pelham, FT correspondant in Baghdad)

July 07, 2004

Iraqi finance minister Adil Abdel-Mahdi spoke about debt in a news conference.

"It is not just the United States which has agreed to write off our external debt, but many others have told us that they are ready to completely forgive the loan... Our debt write-off would help in moderating the crude oil prices in the long term as we would be able to exploit our oil resources efficiently... Forgiving our debt is critical to the economy which has been affected by external and internal wars for many years. We are sure the world would understand this."

He also said Iraq would offer contracts to companies of creditor countries, a demand made by Germany at the G8 summit. "We are having many proposals from companies operating in these countries and their contracts are being looked into. Some of them have agreed to convert their loans into projects."

He noted that a meeting of creditors has been organised for late October in Tokyo where further progress on the issue would be possible.

Iranian international law legal expert Dr. Hussein Mir-Mohammad Sadeqi told the Mehr News Agency that Saddam Hussein committed crimes against Iran during 1980-1988 Iran-Iraq war giving Iran appropriate grounds to seek the implementation of UNSEC Resolution 598 to receive reparations. He said that Saddam's crimes committed during the war between the two nations did not feature among the charges leveled against Saddam a few days ago, while his crimes committed during the invasion of Kuwait were put forward at the trial. Asked why the Iranian Judiciary and foreign minister failed to file a lawsuit with the Iraqi court before the session began, the academic said that filing a complaint with the court could have been effective but it was not the only means to highlight Saddam's crimes against Iran. Sadeqi believes that in order to pursue war reparations Iran should reach an agreement with the Iraqi government, or the UN Security Council should be asked to make the decision. He further explained that subsequent to UNSC Resolution 598, the former UN Secretary General Javier Perez de Cuellar declared Iraq initiated the 1980-1988 war, already approving Iran's call for reparations.

Jubilee Iraq sympathises with Iranian losses under Saddam, but the Iraqi people also suffered to a similar or greater extent and should not be required to pay reparations.

July 03, 2004

Foreign Minister Hoshyar Zebari met with Romanian Foreign Minster Mircea Geoana today. Speaking at a news conference, Geoana said the Romanian debt claim was about $2.5bn. This is a significant increase on the $1.7bn figure which was quoted in April 2003. A small increase might come from interest over the last year and from the devaluation of the dollar (depending on what currency the Romanian claim is denominated in), but the increase of almost 50% is worrying.

Geoana said "It's is important to understand that for the short run, the Iraqis will need all the resources they can get," and he said "creative methods" for dealing with the issue are needed, such as boosting Romanian investments in Iraq, or the import of Iraqi oil. Zebari said that there is agreement that the solution should come through the Paris Club of creditor nations, but that Iraq will need "postponement (of the debt) or to search for other ways to deal with it." (AP reporting from Baghdad)

July 02, 2004

As Jubilee Iraq protested outside the UNCC in Geneva, calling for an immediate moratorium on reparation payments and new awards, the Commission awarded a further $380.5m of reparations against Iraq for claims dating back to Saddam's occuption of Kuwait. In total $48.6bn has been awarded of which $18.4bn has been paid, leaving $30.2bn outstanding. About $22bn-$23bn of the $30bn still owing concerns the Kuwaiti government and Kuwait-based oil companies, Mojtaba Kazazi, UNCC executive secretary, said.

The commission also agreed to set up a procedure to process late claims by up to 38,000 "bedouns," stateless or undocumented Arabs whose name comes from the Arabic word for "without." Joe Sills, spokesman for the U.N. Compensation Commission, said Kuwait has until Dec. 31 to collect and submit bedoun claims to the commission. They will be handled under a special, fast-track process that will give each approved claimant $2,500 - so the total could be over $100m.

The commission hopes to complete the bulk of its work by the end of this year. Currently $200 million is being paid out every three months.

The FT reports that "Saudi Arabia and Kuwait spoke up strongly earlier this week against any attempt by Iraq's interim government to renege on payments of compensation."

The LA Times quotes Younis, a restaurant manager in Basra, as complaining that Kuwaiti families are buying new cars and remodeling their palaces on the backs of the downtrodden Iraqi people.

July 01, 2004

The IMF spokesman Thomas Dawson said the Fund will recognition the interim Iraqi government and push new loans provived Iraq pay it $80.5m in outstanding claims.

At Madrdid last October, then-IMF Managing Director Horst Koehler indicated the IMF could make loans of $2.5 billion to $4.25 billion to Iraq over the next three years. The World Bank, has indicated it is prepared to lend Iraq between $3 billion and $5 billion over the next five years.

Dawson refused to confirm published accounts that the IMF's recent report looked at various levels of debt forgiveness, from 67 percent to 95 percent of the arrears. "The scenarios don't contain any recommendations for a particular level of debt relief," Dawson said. "That is a decision for Iraq and its creditors."

US law firm Cleary Gottleib has been appointed legal council by the Iraqi interim government to advise on debt and reparations. The firm has a strong track record in soverign debt however, as a result, its clients inevitably include many of Saddam's creditors such as Russia.

Jubilee Iraq hopes that the firm will not be swayed by these potential conflicts of interest, and instead will work towards the best resolution for Iraq by arguing that most of Saddams debts are odious and the new Iraq has no moral or legal obligation to repay them.

Cleary Gottleib has already been involved in Iraq, advising JP Morgan Chase on its successful bid to run the Trade Bank of Iraq. This has led to some speculation that JP Morgan may be appointed as the partner investment bank representing Iraq on debt. If this does happen then there will be a serious conflict as JP Morgan is one of the largest private creditors, and so it will first need to either sell its debt claims or write them off.

Article 25 of the Transitonal Administrative Law: The Iraqi Transitional Government shall have exclusive competence in the following matters: (A) Formulating foreign policy and diplomatic representation; negotiating, signing, and ratifying international treaties and agreements; formulating foreign economic and trade policy and sovereign debt policies.

Austria Today reports that the Greens Party's foreign-affairs spokeswoman Ulrike Lunacek called on Thursday for forgiveness of Iraqi debt. Without this, she warned, the country would have "no chance. Iraq is one of the most heavily-indebted countries in the world. Without debt forgiveness, social and economic stability will be impossible to achieve." She called for the United Nations to take the lead role in fairly and independently negotiating an agreement on Iraqi debt-relief. Lunacek also urged the other Austrian parties to support a Greens' parliamentary initiative on the issue.

The Austrian Green Party hosted an event earlier in the year at which Ahmed Jiyad and Justin Alexander of Jubilee Iraq spoke.