November 30, 2004

Foreign Minister Saud al-Faisal told a news conference in Riyadh today that "The kingdom will abide by our commitment for a major drop in Iraq's debt," without giving any details. Iraq says the money was provided as grants and need not be repaid.

Iraqi Prime Minister Iyad Allawi will visit to Russia on 6-7th December to discuss debt. AFP rewrites "In exchange, Russia is asking that contracts signed with the regime of ousted Iraqi leader Saddam Hussein be honored, including a 1997 deal giving the LUKoil corporation exploitation rights in the 10-billion barrel West Qurna-2 oil reserve."

Last week Saad Salih Jabr, Chairman of the National Assembly's Economic and Financial Committee, greeted the Paris Club deal with a resolution containing a powerful critique and demanded fairer treatment because of the odious nature of the debt. His resolution also called for the end of reparations payments. Today, with Prime Minister Allawi in atendence as an observer, the National Assembly voted on the resolution and passed it unanimously.

November 29, 2004

Our Iraq Director, Dr.Shakir Issa, met today with Dr. Muhsein Abdul Hamid, head of the Iraqi Islamic Party (the largest Sunni party) and Sheikh Abbas al-Bayati, Secretary General of the Islamic Union of Iraqi Turkomen. Both meetings were positive and the parties issued supportive statements on the odious nature of the debt.

Iraqi Foreign Minister Hoshyar Zebari said to Kuwaiti newspaper Al-Siyasah today that hoped Kuwait and Saudi Arabia would offer more than the 80% reduction decided by the Paris Club.

Russian Finance Minister Alexei Kudrin told a press conference, that Russia's claims on Iraq will be $700m-$1bn, depending on verification with Iraq, from an initial amount of $10.5 billion. He also admitted that the 65% write down applied to Soviet era debts was because of their military nature.

The full text, care of the Russian Fedral News Service is: "Russia favored a 50% write-off... But the consensus of the club's creditor countries was 80%... I will tell you one thing that I haven't had the time to explain earlier: Russia is not entitled to any penalty interest, we have not been assessing them... The write-off will first apply to the penalty interest, then to the principal, and for Russia this means a 50% write-off as compared with 80% for the others. So, we did reach our goal in the talks. But I would like to remind you that Russia has been taking part in additional write-off of debts since 1997 when we became Paris Club creditors... In addition, it was taken into account that much of that assistance to a number of countries took the form of military supplies which differ significantly from, say, other commercial supplies, so-called economic supplies and economic credits. So, Russia, realizing that much of our aid of this kind was military, decided to write off the debts of such countries as Iraq, for example, by 65%. So, we accept the initial discount of 65% now while others are not taking part in that discount because we took that obligation back in 1997...[The] 65% and 50% that we will write off under those formats will amount to about 90% after all the write-offs are completed in 2008. But I repeat, we have done everything to make these conditional on real steps to implement a corresponding program, the forecasts that will be received from the IMF and compliance with a whole range of structural measures... A verification of the debt is currently underway. As a matter of fact, Iraq's debt to us hasn't been finally verified because Iraq was not in a hurry to verify it because it was waiting for a maximum write-off and was not in a hurry to finalize all our documents. At present a further hindrance is the fact that there has been a change of regime, a change of government and we have to recover the data. But we do have the data. And we now need the new Iraqi authorities to verify them against their data or to agree with ours. We are talking about less than a billion dollars. Of course, the final size of the debt... will be in the neighborhood of 700m to $1bn depending on the results of verification."

November 28, 2004

The Iraqi Lawyer's Union today issued a strong legal opinon on the odiousness of the debt. "Our union calls on the Central Bank of Iraq and Iraq's Ministry of Finance to refuse [the Paris Club] offer because it presumes these claims against the Iraqi people are legitimate and does not recognize them as odious in law. We also believe this offer represents the Paris Club's tacit admission that its claims are largely illegitimate. Given that the Paris Club members were the main financiers of the previous regime, that their decisions were driven by political, not commercial interests, that the monies were used for military purposes, and that the proposed Paris Club settlement would be conditional upon adherence to IMF policies, we believe this offer is an insult to the Iraqi people.... The central committee of our Union, and its legal committee have concluded, based on international legal principles and precedents, and state without reservation, that the majority of these debts are odious and are not legally enforceable." (in english, in arabic - pages 1,2,3,4,5,6)

Ben Wright, writes in The Business: "The loans written off have not been classified as "odious debt" - loans that were used, with the knowledge of the lenders, against the needs of the nation. These debts can be deemed illegitimate and do not require repayment. Few would argue that the money former Iraqi dictator Saddam Hussein borrowed was used against the needs of Iraq. The difficulty comes in defining what was in 'the knowledge of the lenders'. Iraq's creditors are not going to own up to the fact."

November 27, 2004

Iraqi Minister of Planning Mehdi Hafez told Al-Sharq al-Awsat he was unhappy with the Paris Club deal: "The Paris Club decision... evokes reservations in Iraq because it is less than the 95% requested by the International Monetary Fund. The reduction should be made in one go and not in stages because that might lead to a reconsideration of the decision by countries of the Paris Club depending on financial developments in Iraq."

November 26, 2004

The Economist writes: "The Paris Club deal is not the end of the haggling over Iraqi debt. Generous or not, the deal owed nothing to the notion that Iraq's debts were odious, incurred by a tyrannical government and therefore unworthy of repayment. The motivation is mostly political." Because the cancellation has not been put on a legal/moral basis but rather has been based on politics and so-called "generosity", it will not be easy to get a similar reduction on the majority of debt which is held by non-PC creditors. "What will the Paris Club deal mean for Iraq's debts to western companies and banks? One London fund manager bristles at the suggestion that it will, or should, have any effect. The Paris Club loans were politically motivated, he says, as was the forgiving of them. Past experience in Russia and elsewhere does not support the idea that other creditors must follow where the Paris Club leads. What will make a difference is Iraq's desire one day to re-enter the global capital markets. For this reason, he says, the Iraqis should press for a write-down of no more than 30%. Richard Segal [of Exotix], however, thinks that none of Iraq's creditors is likely to escape with a write-down lower than 65-70%. That is in part thanks to the requirement of “comparability” written into the Paris Club agreement, meaning in essence that a debtor nation should not give better terms to other creditors. A particularly sticky point will come when poor countries such as Bulgaria and Romania negotiate with oil-rich Iraq. They may not feel as generous as France and Germany."

"Nice try, Paris Club" writes debt expert Patricia Adams in the Canada National Post. She covers the resolution by the Interim Iraqi National Assembly, which she recognises as strong as a challenge to the Paris Club, which she paraphrases as: "We don't want your charity. We want our rights, and the rule of law. Saddam's debts are odious debts. They are not the debts of the Iraqi people." She appauls the courage of the Iraqi National Assembly in demanding a fair an open process of arbitration on debt instead of the behind-closed doors rulings of the Paris Club: "To head off the Iraqi Assembly's declaration on odious debts, and avoid a challenge to their ability to lend to questionable governments, the Paris Club members rushed through their debt forgiveness program prior to the establishment of a democratic Iraqi government following elections in January. This tactic did not work."

November 25, 2004

ITAR-TASS news agency reports that Russian Finance Minister Alexei Kudrin told reporters at the State Duma that the Paris Club deal won’t be in vain and will yield results for Russia: "We are interested in seeing that the restructuring of the debt serve our interests in the region, including as concerns renewal of contracts with Russian enterprises for developing [oil] deposits. We work in the interests of the Russian business, which, I hope, will get contracts in Iraq when its solvency is restored." He said Russia only agreed to the 80% figure at the last moment of the negotiations.

At the Russia-EU summit Valdimir Putin said: "Within the framework of the Paris Club, we have taken the unprecedented step of writing off Iraqi debts to us. Provisionally, when joining the Paris Club, we took upon ourselves the obligation to write off 65% of a country like Iraq, plus new agreements. Altogether, Russia will write off over 90 per cent of (Iraq's) debts." He is refering to the Paris Club's only (implicit) acceptance of the odious debt doctrine, whereby all Soviet-era debts are written down by 65% prior to, and in addition to, any Paris Club reduction. This unusual measure, agreed when Russia joined the Paris Club in 1997, is really a recognition that most of the Soviet debts were Cold War financing of dictatorships. However the Paris Club has never recognised that much of the debts claimed by its 18 western members also come from politically motivated and odious Cold War loans, including those to Saddam.

Plamen Oresharski, the former Bulgarian finance minister and co-owner of the Bulgarian Consultancy company, told the PARI daily: "In spite of the fact that we are not a member of the Paris club, its decisions are an example to be followed. We will lead talks to decrease the rate down to 80%." He said nobody is in position to force Iraqi government into negotiations with Bulgaria, and added that Iraq could wait until Bulgaria becomes a member of the European Union so that the obligations of the Paris club become mandatory for it.

Saddam's Debts Must All be Cancelled - FT today

Sir, It is hypocritical for the UK government to welcome simultaneously both a date for Iraqi elections and partial debt relief for Iraq that is tied to an International Monetary Fund structural adjustment programme.

The IMF has long used such programmes to sideline or undermine parliaments in order to impose its extreme - and often devastating - free-market agenda on developing countries. Now from the very first day that the new Iraqi parliament sits it will find virtually every important economic decision predetermined by the coterie of rich countries that runs the IMF.

For example, the IMF - whose board is chaired by Gordon Brown - has already said a new government must undertake tax reform, financial sector reform and restructuring of state-owned enterprises, not introduce new trade restrictions, and only "provide the minimum adequate level of social support". Yet as Dr Saleh Yasir, an Iraqi economist, warned over a year ago: "An IMF structural adjustment programme would create more social tension and cause a social explosion which might destroy the transition to democracy."

If Tony Blair really wants meaningful democracy in Iraq he must call for the unconditional cancellation of all Saddam Hussein's odious debts. He must also ensure that Iraq's parliament has the right to be fully involved in developing all relevant IMF and World Bank measures, and hold the final power of ratification.

Ensuring the primacy of the sovereign national parliament in this way will improve implementation of measures to reduce poverty, enhance good governance and foster democracy.

Peter Hardstaff, Head of Policy, World Development Movement
Justin Alexander, Director, Jubilee Iraq

In an article in the Irish Times, Iraq's Ambassador to France, Mowafak Abboud, explains that he appealed to creditor self-interest in the Paris Club meeting: "We pointed out that the high price of oil is the result of instability in Iraq. Oil at close to $50 a barrel is costing creditor countries the equivalent of Iraq's debt every few weeks."

AFP reports that several Kuwaiti lawmakers vowed today to oppose any reduction in Saddam's debt. "These billions of dollars they want to write off for Iraq are the funds of the Kuwaiti people," Islamist MP Waleed al-Tabtabai said in a statement, and said the government would do better to forgive the debts of its own citizens. "We will not accept any reduction in the debt ... We will not accept the mediation of any country for writing off the debts of a state that occupied Kuwait in 1990," tribal MP Abdullah al-Fahma'a said to Al-Anbaa newspaper. "MPs are unanimously opposed to conceding a single dinar ... The debts and compensation are the right of the Kuwaiti people and the state," tribal MP Ali al-Hajeri said. Islamist MP Fahed Al Khannah said: "If Kuwait just decided to drop the debt, then I don't agree, but if there are any agreements that would enhance Kuwait's role in Iraq's reconstruction ... then I would accept."

The Economist Intelligent Unit today spells out the importance of Iraq beginning to service debts for corporate investment: "For companies doing business with Iraq the prospect of a resolution to the debt question is encouraging. As long as Iraq remains technically in default on its external debts it is difficult for companies to raise loan finance for business in Iraq. This is not relevant for the main reconstruction projects, which are financed by grants or by past and current Iraqi oil revenue. However, it is a factor for companies looking to invest in new projects, for example in the oil sector."

November 24, 2004

Kuwati foreign minister Sheikh Mohammad al-Sabah said in a lecture at Kuwait University today: "We will recommend parliament to approve the reduction... of 80% decided by the Paris Club of creditors. We support any write off of Iraqi debt." This is more positive than was expected from Kuwait, but it should be noted that the so-called Kuwaiti "debt" was actually grants to Saddam during the Iran-Iraq war and is therefore not debt. If it was debt then it would be very clearly odious. Kuwait is still demanding payment of nearly $30bn of war reparations which it refuses to negotiate.

A spokesman for the Austrian finance ministry told the Austrian Press Agency that the Paris Club’s decision had been "a succcess." Austria, he said, had taken "a restrictive approach" to the question and "slammed on the brakes" during the negotiations. Der Standard quotes Rudolf Scholten, chief of the Austrian Control Bank (OeKB) "The Iraq debts have largely been digested." He said the Austrian claim is over €800m + €400m interest. He said the OeKB has achieved major surpluses for five or six years and so has not problem in reducting the debt.

One Iraqi exile, working as a senior economist for a Western government, wrote to Jubilee Iraq today in response to the Paris Club deal, which is conditional on IMF policies: "I agree with your analysis about debt reduction that the [creditors] have plans to keep Iraq on a leash. Unfortunately, this is the game. The interim government is installed by the occupying power and it cannot say no to these arrangements. When I look at past IMF policy errors I get frightened. Iraq stands no chance of success if the IMF makes policies like those it made in the past. You should also explain to your Iraqi readers what will happen when the food subsidy is removed and privatization starts. Someone will have to lend Iraq more money to handle anticipated inflation because the Iraqi government has no money. If the food subsidy is removed Iraq will descend into chaos even more sever than what we have now. Remember what happened in Russia in the early 1990s. Iraq has huge unemployment. When prices double or more, people will kill their neighbors for a piece of bread and terrorists for hire will be queuing in downtown Baghdad. I sure hope the IMF gets it right this time."

Here is a short article by Jubilee Iraq on the four main shortcomings of the Paris Club deal.

November 23, 2004

Reuters reports a statement from Romania "The Finance Minister (Mihai Tanasescu) wrote today to all East European countries, Bulgaria, the Czech Republic, Croatia, Poland and Slovakia, to whom Iraq owes money, asking for a common position on recouping Iraqi state debt... Romania is not a Paris Club member, therefore we are not obliged to observe its decision. We have to defend Romania's interest, so we'll make all efforts to recoup the debt of around $1.7 billion. This money belongs to Romanians and we have to recoup it. We are convinced that Paris Club and international institutions will understand our position in this matter, taking into account the permanent support Romania has given to Iraq's reconstruction." Iraqi Finance Minister Adel Abdul Mahdi will be visiting Romania 16-18 December. Romanian Prime Minister Adrian Nastase said on Radio Romania Actualitati: "We understand perfectly that Iraq is unable to pay right now, so the idea is absolutely natural of rescheduling these debts."

The Reuters report said Hungary claims $120m and Hungarian Finance Ministry press chief Ferenc Pichler as saying his country was considering the issue but had made no decision. The Czech Republic (claim quoted at $170m) and Bulgaria said they would consider Romania's proposal.

Emad Mekay is one of the first journalists to properly cover the problems with the Paris Club deal. He writes that it "saddles [Iraq] with a burdensome economic programme that threatens to take decision-making power from Iraqis and put it in the hands of officials from the IMF... [which has] long been roundly criticised for taking away control from local governments and restricting their spending on health, education and other social services." He reports that the Washington-based 50 Years Is Enough Network criticises the IMF strings attached to the deal since these "force economic changes that benefit local elites and multinational corporations but exclude the poor." The French Plate-forme Dette et Développement said it is scandalous that no Paris Club nation had acknowledged that much of the country's debt was odious, lent to the Hussein's regime to bankroll his war machine and brutal dictatorship.

German coalition Erlassjahr makes similar criticisms and "demands a fair and transparent arbitration tribunal in place of Paris Club which is dominated by the creditors." CADTM argues: "The Iraqi debt does not realy exist. Once Iraq has elected its government democratically, then it will be perfectly justified to refuse to recognize the debt contracted by Saddam Hussein and then accepted by the authorities appointed by the United States."

AFP reports that both Kuwait and Saudi Arabia have said no debt-relief commitments are possible until after Iraq has an elected and internationally recognized government. The article quotes the Kuwaiti claim as $15bn, less than some previous estimates, and the Saudi claim at $9bn plus $19bn to private Saudi companies and banks "which would not be included in any deal between the two governments." Qatar claims $4bn and the UAE claims $3.8bn and have adopted stances similar to Kuwait and Saudi. The AP adds that: "Saudi Arabia also made participation by Saudi companies in Iraq's reconstruction a condition of any debt relief," and "Jordan is unlikely to write off Iraq's debt, a Jordanian government official said on condition of anonymity."

On the other hand Adel Al-Jubeir, foreign affairs adviser to Saudi Crown Prince Abdullah, said at a lecture in Ohio that Iraq owes Saudi Arabia $30-35bn and: "We have been engaged with the Iraqis on ways of restructuring Iraq's debt and forgiving a chunk of it. We will do whatever needs to be done in order to help Iraq back on its feet." Also Prince Sa'ud al-Faysal, the foreign minister, said at Sharm al-Sheikh that he believed the debts should be slashed considerably. The final communique of the conference in Sharm al-Sheikh is a rather bland: "[we] call on Iraq's creditors to take steps to reduce substantially Iraq's sovereign debt."

On the Al-Jazeera talkshow The Opposite Direction today Dr Nuri al-Muradi, spokesman for the Iraqi Communist Party- Al Kader, replied to a question whether the Paris Club deal is a great accomplishment: "No. Let us sit down with the United States and settle accounts involving about $2 trillion that Iraq lost during the embargo. They want to give us crumbs so that we forget the more important stuff."

November 22, 2004

This morning Saad Salih Jabr, Chairman of the Economic and Financial Committee of the Interim Iraqi National Assembly announced a resolution by the Assembly declaring that:

(1) The debt is almost entirely odious.
(2) The Paris Club has no right to impose IMF conditions on Iraq.
(3) Iraq should repudiate the debt but offer creditors the opportunity of a fair legal arbitration to prove if their loans to Saddam were actually beneficial to the Iraqi people.
(4) A broad based Iraqi Debt Committee should be established to move the process forward

The Assembly greeted the resolution with a standing ovation. The meeting was broadcast live on Al Irakia and Al Sharkia TV. Here is the resolution in Arabic and English. Media contact Shakir Issa on +964 7901 783025 or Justin Alexander on +44 7813 137171 for more information.

Postscript: The resolution was passed unanimously on 30th November.

Interim Iraqi Prime Minister Iyad Allawi's office issued a statement saying the Paris Club deal is insufficient: "The prime minister notes that Iraq's debt burden, while now very significantly reduced, remains significant... [and] hopes that the Paris Club countries will consider reducing Iraq's debt further... [He] looks forward to Iraq's Arab brothers forgiving their debts from Iraq in the very near future, to contribute both to Iraq's and their own security and development." Interim Foreign Minister, Hoshyar Zebari said: "We wanted 90-95%... because the Iraqi people are not responsible for the aggressive police and misuse of funds of the former regime of Saddam Hussein."

Basim al-Sheikh, the editor of independent Iraqi newspaper Ad-Dustour criticizes the creditor countries for this "meagre rate of cancellation", he writes: "The Paris Club wrote off almost one-fourth of Iraq’s debts, which is a small part that does not help Iraq enhance its economy in the post-Saddam stage. Paying the debts back lasted years because of sanctions imposed after Iraq’s invasion of Kuwait. Besides, most of the debts were the result of contracts to supply weapons. The countries that supplied Saddam Hussein’s regime with weapons encouraged it to get into wars to achieve certain interests. So these countries are calling for paying back debts which they should be punished for. It does not make sense that Iraq should pay back debts for buying equipment necessary to produce weapons of mass destruction. Thus it will pay the price twice: once under the dictator’s rule, and once under the slogan of liberating it from the dictator."

Sylvain Charat, director of policy studies at the French Eurolibnetwork think-tank, writes : "The Paris Club decided to write off 80 percent of the $120-billion Iraqi debt. That was the least it could do since most of the loans were tainted in the first place. But on this point, the very secretive Paris Club remains silent. With its prestigious-sounding name and reputation, it is rarely noted that this club is a convenient way for democratic governments to clean up after shamefully-hidden loans to less than savory recipients. Liberated countries, like Iraq, should not need to prove that these debts are illegitimate. It is, rather, for the creditors to prove that their loans were made for legitimate purposes."

Seperately Frederick Barton, of the Center for Strategic and International Studies in Washington, said "This is a step in the right direction but it's still not anywhere near as far as it should go," but he added Iraq's shattered economy will not be viable without greater reduction in debt and war reparations.

November 21, 2004

Online magazine, Tiscali Europe, insists that through the Paris Club deal "The issue of accountability has been glossed over and those who made loans to Saddam Hussein knowing where the money was likely to end up have been given the glow of respectability by being lumped together with other "normal" debt."

The Russian Finance Ministry admits that the Paris Club deal, rather than reducing Iraqi debt payments, actually will enable them to begin. "[The Paris Club deal] transfers this debt from the 'hopeless' into the 'being serviced' category." This fits with a Russian comment almost two years ago: "Receiving even part of the debt would be a plus for Russia because no one expected Saddam Hussein would repay the money." (Andrei Zagorskii, Deputy Director of Moscow's Institute for Applied International Studies, 15 April 2003)

Assuming all non-Paris Club creditors agree to the 80% reduction, which is far from certain, Iraq would still be shackled with over $25bn of debt. This is on top of the new loans being peddled by the IMF and World Bank and the $31bn war reparations awarded so far. This compares with Iraq health budget this year of only $947m and education budget of just $544m. The 80% deal only sounds good because the loans made to Saddam were so vast, not because it puts Iraq's economy on a sound footing, even if the Paris Club had offered an additional 10% this would have still left Iraq with a credit rating of at least four notches below investment grade, on par with Ukraine: "Iraq's debt stock would need to fall by about 90% to $14bn for its interest service burden to compare with the median for sovereigns rated B+ or lower by Fitch." (James McCormack, Fitch Ratings)

The IMF conditions – such as privatisation, ending food rations & fuel subsidies and restricting salaries & pensions – could further exacerbate the poverty and instability in Iraq. "IMF conditions neglect the social consequences of economic policies. The experience of the Soviet Union [in the 1990s] shows that the transformation costs were immense, and Iraqis could not bear these social costs in their miserable condition. An IMF structural adjustment program would create more social tension and which might destroy the transition to democracy." (Dr. Saleh Yasir, Iraqi Communist Party)

The deal will certainly increase Iraqi cynicism about the forthcoming elections and the degree of soveignity the US will really allow them to exercise. 10 weeks before Iraqis may have their first chance in decades to elect their government, the Paris Club is essentially taking away control of key economic policies from any elected government in Baghdad and to giving it to the IMF in Washington. "We are Iraq! We were the cradle of civilization and I don’t want to see anyone controlling our economy by any means." (Ibrahim Bahr Al-Uloum, Former Oil Minister)

Furthermore the Paris Club deal completely sidesteps the most critical issue for Iraqis - the fact that these debts come from loans which deliberately financed Saddam's regime during the Iran-Iraq war. "The creditors committed an act of oppression against the people of Iraq by providing Saddam's regime with these funds…There is no question about the odious nature of these debts". (Ayatollah al-Hakim, Najaf)

More Iraqi views

Paris Club President Jean-Pierre Jouyet told reporters that an agreement had just been signed. He said the total debt claimed by Paris Club members is $38.9bn which could be reduced to $7.8bn in three steps over the next four years. He said the first tranche of 30% would be written off immediately, another 30 percent will be canceled when Iraq agrees on an IMF stand-by program expected in 2005. The third and final tranche of 20% will be canceled in 2008, if Iraq completes the 3-year IMF program. The IMF plan will be drawn up in the next few weeks, according to the German Finance Ministry.
US Treasury Secretary John Snow said: "We look now to the non-Paris Club members to take similar action." Paris Club President Jean-Pierre Jouyet also said: "It is essential that all of Iraq's creditors give an equally favorable treatment."

The Paris Club statement said: "The Iraqi delegation described the challenging economic and financial situation faced by its country and presented the main measures for recovery included in the program of the Iraqi Government and supported by the Emergency Post Conflict Assistance approved by the Board of the International Monetary Fund on September 29, 2004. Paris Club members took note of the strong commitment of the Government of Iraq to implement the policies required under this program and reaffirmed their support. The representatives of the Creditor Countries, aware of the exceptional situation of the Republic of Iraq and of its limited repayment capacity over the coming years, agreed on a debt treatment to ensure its long term debt sustainability. To this end, they recommended that their Governments deliver the following exceptional treatment: - an immediate cancellation of part of the late interest representing 30% of the debt stock as at January 1, 2005. The remaining debt stock is deferred up to the date of the approval of an IMF standard programme. This cancellation results in the write-off of 11.6 billion US dollars on a total debt owed to the Paris Club of 38.9 billion US dollars; - as soon as a standard IMF programme is approved, a reduction of 30% of the debt stock will be delivered. The remaining debt stock will be rescheduled over a period of 23 years including a grace period of 6 years. This step will reduce the debt stock by another 11.6 billions US dollars increasing the rate of cancellation to 60%; - Paris Club Creditors agreed to grant an additional tranche of debt reduction representing 20% of the initial stock upon completion of the last IMF Board review of three-years of implementation of standard IMF programmes. This debt treatment would reduce the total debt stock from 38.9 billion to 7.8 billion US dollars. On a voluntary basis, each creditor country may also undertake debt swaps. The Republic of Iraq has committed to seek comparable treatment from its other external creditors."

Reuters reports that France and Russia have agreed with the US-German proposal. A source said "France is in agreement for a phased cancellation. One tranche straight away -- the late interest (payments); one tranche of the principal in 2005, and another part of the principal in 2008, depending on fulfillment of the agreement with the IMF." The Paris Club is holding a press conference now (16.30 GMT). Details here soon. A formal press release may be on the Club's website later today.

Bulgarian Finance Minister Milen Velchev said the Paris Club decision has no effect on Bulgaria, since the country is not a member of the club. "We will make every effort to clinch the most favourable agreement". Deputy finance minister Lyubomir Datsov commented that the debt ($1.7bn claimed) makes up 10% of Bulgaria's GDP, while for countries like France and Germany it is very small. Other creditors normally apply comparable terms to the Paris Club, this is a worrying early indication that the some other major creditors may refuse to do this. "Bulgaria shall continue to seek payment of Iraq's debt" Deputy Foreign Minister Gergana Grancharova said at a press conference.

The AP reports that the Paris Club members, bar Russia, agreed a deal in the early hours of Sunday morning, which should be offically announced later today. Reuters reports: "There remain some obstacles on the terms and the details of an agreement. (The talks) are continuing. They could continue this afternoon." The AP says the Russian negotiators didn't agree to the deal because they needed to get their government's approval. AFP notes that Russian Finance Minister Alexei Kudrin is not attending the G20 meeting in Berlin, which may explain why "Russia wasn't in a position to give an agreement." Russia new agency RIA Novosti says, confusing, that "Russia declined to support the proposal... [but] still give the "green light" to the stage-by-stage reduction of the Iraqi debt."

The accord would include measures on interest owed by Iraq and would be "strongly conditioned" on an International Monetary Fund program, said an anonymous official.

November 20, 2004

Jubilee Iraq on BBC World Today program 10pm GMT (.ram file, starts about 6th minute)

A source at the Paris Club of creditors told Reuters that the deal was likely to be finalized Sunday, adding: "There is an agreement between the main creditors on (cancelling) 80% of the debt." A US official said: "The discussion in the Paris Club is now more on the technical side... and we expect things will be wrapped up soon."

German Chancellor Gehard Schroeder said in Berlin: "There is no final outcome so far, there are discussions, particularly with France. We have to point out that conditionality has to be applied in the last stage of what has been agreed or what will be agreed." He also indicated that the debt write off might be reassessed again in future. "If the situation in Iraq improves fundamentally - Iraq is a rich country with respect to its oil reserves - we should be able to talk about it again."

In an update a few minutes ago, Reuters clarified that Eichel comments were just an offer on the table which will be put to delegates in Paris, not a final agreed deal. A source in Paris said: "There's no deal yet." Reuters writes: "G20 sources said there was still a disagreement about the timetable for debt reduction and conditions. One G20 source said the debt write off would take place over eight years, but another said that was a timetable that was unacceptable to the United States."

Germany's finance minister Hans Eichel said today: ''I had talks with my American colleague, John Snow, which created the basis on which the forgiveness of Iraqi debt can be settled mutually in the Paris Club. We agreed that there should be a write-off of debts in several stages amounting to 80% in total." 30% would be written off immediately, another 30% in a second stage ''tied to a program of the International Monetary Fund'' and a further 20% ''linked to the success of this program. Within this framework, the necessary decisions can now be taken in the Paris Club.'' He also added that: "by doing this we see a special situation for Iraq. This does not create a precedent for any other case.'' Reuters adds that a G20 source said that debt relief would be phased over an 8 year period.

This deal is a further crime from the creditors who financed Saddam's oppression. Assuming all non-Paris Club creditors agree to the 80% reduction, which is far from certain, Iraq would still be shackled with over $25bn of debt, not to mention new loans being peddled by the IMF and World Bank, and the $31bn reparations awarded so far. Almost all of the debt is odious, and should be written off entirely, immediately and uncondionally, not partially, over 8 years and based on dangerous IMF conditions.

November 19, 2004

Very unusually the Paris Club is extending talks on Saddam's debt to tomorrow, the first time we are aware that their monthly meeting has spilled over to the weekend. The implication is that the creditors are finding it difficult to agree on a common position. French foreign minister Michel Barnier reiterated his position that because "Iraq has resources," a reduction of only "50% is reasonable and at the same time useful." His Japanese counterpart, Nobutaka Machimura said that "what is most important is to find a solution that is acceptable to everyone. Japan is Iraq's largest creditor and we are therefore paying great attention to this question."

Discussions at the Paris Club are continuing today, no news as of yet, so check back this evening when there may be an announcement.

November 18, 2004

Very little news has come out of the Paris Club meeting yet. Iraqi Finance Minister Adel Abdul Mahdi spoke yestarday, and Reuters reports that the talks could go on beyond Thursday. A press release should appear on the Paris Club website as soon as a deal is agreed.

President Jacques Chirac's spokesman, Jerome Bonnafont said on Tuesday. ""We are committed to this goal of a result before the end of the year. We are convinced that a significant gesture needs to be made in Iraq's favour, [but shoul] remain within proportions compatible with what is done elsewhere for the world's poorest countries," declining to give any figures.

British Chancellor Gordon Brown reiterated at an EU finance ministers meeting in Brussels on Tuesday that "The vast majority of the Iraqi debt should be written off, but we need to get an agreement from all countries that are owed debt." He said "It will probably be a matter that will have to be raised in the G7," refering to the G7 finance ministers meeting in Berlin on Friday together with counterparts from the G20 group.

November 17, 2004

Today Jubilee Iraq met with the Paris Club President Jean-Pierre Jouyet to communicate the anger expressed to us by so many Iraqis that the Paris Club members are planning on extracting significant amounts of Saddam's odious debt from them. Iraqis feel that he Paris Club is deeply biased in favour of the creditors interests and reject the economic conditionalities which will be a condition of partial debt relief through the Paris Club. Jubilee Iraq gave Paris Club officials a sheet of quotes from Iraqis on the debt.

We also met with members of the French National Assembly's Foreign Affairs Committee, and staged a protest outside the French Treasury, where the Paris Club was meeting. [more photos]

November 16, 2004

Jubilee Iraq's Justin Alexander spoke today at a seminar on odious debt at the Swedish Human Rights day. The audience was enthusiastic and the discussion was very fruitful. A copy of the 4-page handout at the seminar is a good upto date overview of the situation as regards Saddam's debt.

November 15, 2004

Iran confirmed today that it is sending its Foreign Minister to the conference on Iraq in Sharma El Sheikh. Iranian Radio Farda reports that Interim Iraqi Prime Minster Allawi is expected to ask Iran to write off its reparation claims. An Iranian foreign ministry spokesman said it is not for Iran’s government to write off these claims: "It is the people’s money and is indispensable."

Although the Paris Club hides behind a mask of economics, apparently linking its decisions to measures of debt "sustainability", in reality it is well known that the Club is really about protecting and horsetrading the political interests of its members, principally the G7 countries. This was admitted by IMF chief Rodrigo de Rato today when, responding to a question about the meeting this week on the Paris Club meeting on Iraq, said: "At the end of the day it's a question of international solidarity, it's a political decision that has to be taken." This is precisely why Jubilee Iraq and others argue that the Paris Club is not the correct forum for tackling Saddam's debt, and a less political and more just body, such as an arbitration tribunal is needed.

November 14, 2004

Jubilee Iraq's coordinator Justin Alexander will be speaking in Norway (Bergen) with SLUG on Monday and Sweden (Stockholm) with Forum Syd on Tuesday.

The table of debts and timeline have been substantially updated.

Jubilee Iraq’s recently appointed Iraq Director, former UN economist Dr. Shakir Issa, has been meeting with Iraq’s political and religious leaders. In Najaf he met with Iraq’s three highest Shia Muslim scholars. They were all very supportive. Ayatollah al-Najafi described the Iraqi people as being "oppressed by demands for repayment of Saddam's debts". Ayatollah al-Hakim said that "the creditors committed an act of oppression against the people of Iraq by providing Saddam's regime with these funds. They should held be responsible for this. There is no question about the odious nature of these debts". Grand Ayatollah Ali al-Sistani blessed Jubilee Iraq for its work on this "just cause" and declared that "we support you in this case". The Ayatollah’s were particularly concerned about the package of IMF economic conditionalities, such as privatization and an end to food and fuel subsidies, that the Paris Club will require Iraq to fulfil in return for partial debt reduction and rescheduling. The Ayatollahs agreed to discuss the issue among themselves and pray for God’s guidance; Jubilee Iraq is keeping them informed of developments.

Hameed Musa, Secretary General of the Iraqi Communist Party, also met with Dr. Issa and expressed his support for Jubilee Iraq, explaining: "The dictator used these funds to build prisons, rage wars with our neighbours and build a vast security apparatus to repress our people."

November 13, 2004

On 16 November the Argentine Congress will debate a bill seeking to repudiate the odious foreign debt contracted during seven years of military dictatorship. The proposed legislation is being introduced by Mario Cafiero MP who has also sent a letter challenging Argentina's current debt restructuring plan to the US Securities and Exchange Commission, which is considering authorizing a massive debt-swap operation exchange 60-70% of Argentina's $100 billion in defaulted debts for new bonds. An Argentine federal court is investigating whether the bonds to be swapped were issued in breach of the national Constitution. (Pdf of the bill), extracts follow:

Be it enacted by the Honorable House of Deputies of the Argentine Nation: The whole foreign debt contracted by the military dictatorship during 1976-83 shall be declared odious…. and the Argentine Nation shall be entitled to recover damages, following an investigation to determine the implications of such debt on subsequent periods and the responsibility of public officials… during the aforementioned military dictatorship.

It is widely known that during the last military dictatorship in Argentina (1976–1983) serious and systematic human rights violations were committed. It is also known that our foreign debt increased enormously during such short period, from approximately $7.8bn to $46bn. Both events could only occur in a historical context in which force defeated Law.

In July 2000, acting Judge Jorge Ballesteros concluded that at least four hundred seventy seven crimes were committed in relation with the foreign debt contracted by the military government… As regards IMF responsibility, in his decision Judge Ballesteros wrote that "it should be remembered that since 1976 our country has been subjected to the will of foreign creditors and that IMF officials took an active role in such negotiations… through the implementation of a vulgar degrading economic policy… which tried to benefit and support foreign and local private companies to the detriment of public companies, which became increasingly impoverished, as evidenced by the privatization proceeds." One of the conclusions we may draw from this judicial decision is the evident complicity of international lending agencies, international private banks and transnational companies which, while knowing the prevailing economic conditions of our country and due to the lack of democratic controls, decided to enter agreements with the military regime. This fact allowed them to consolidate a political and economic project without any possible opposition within the frame of a massive violation of Human Rights.

Although hard and painful, as we sought to find the truth and punish those responsible for the commission of crimes against humanity, we should proceed in the same way with respect to the illegitimate foreign debt contracted by the military dictatorship, since both events were part of the same political strategy, the damages of which persist until today. Mr. President, in view of the aforementioned grounds, we request the immediate approval of this Bill.

November 12, 2004

Jordanian Prime Minister Faysal al-Fayiz told Al-Dustur newspaper: "We cannot cancel them. Our resources are limited and we cannot cancel Iraq's debts. It has been discussed with the Iraqi government. As far as we are concerned, we will not concede our rights in the matter of debts. So we have suggested that Iraq supply us with oil for a period of 10 years." (translated by BBC Middle East Monitoring)

November 09, 2004

John Perkins, a former respected member of the international banking community and consultant to the US government candidly reveals in his autobiography, Confessions of an Economic Hit Man how he helped the US cheat poor countries by lending them more money than they could possibly repay and then take over their economies.

"It was giving loans to other countries, huge loans, much bigger than they could possibly repay. One of the conditions of the loan–let's say a $1 billion to a country like Indonesia or Ecuador–and this country would then have to give 90%of that loan back to US companies to build the infrastructure–a Halliburton or a Bechtel. These were big ones. Those companies would then go in and build an electrical system or ports or highways, and these would basically serve just a few of the very wealthiest families in those countries. The poor people in those countries would be stuck ultimately with this amazing debt that they couldn’t possibly repay. A country today like Ecuador owes over fifty percent of its national budget just to pay down its debt. And it really can’t do it. So, we literally have them over a barrel. So, when we want more oil, we go to Ecuador and say, “Look, you're not able to repay your debts, therefore give our oil companies your Amazon rain forest, which are filled with oil.” And today we're going in and destroying Amazonian rain forests, forcing Ecuador to give them to us because they’ve accumulated all this debt. So we make this big loan, most of it comes back to the United States, the country is left with the debt plus lots of interest, and they basically become our servants, our slaves. It's an empire. There's no two ways about it. It’s a huge empire. It's been extremely successful. (Democracy Now interview) He explains the US economic deal with Saudi Arabia and says: "And in Iraq we tried to implement the same policy that was so successful in Saudi Arabia, but Saddam Hussein didn't buy. When the economic hit men fail in this scenario, the next step is what we call the jackals."

November 08, 2004

At a press conference today Allawi was asked whether any progress was made on debt during his visit to Europe, he replied: "It was a positive visit. I met in Italy with the Italian prime minister and then in the European summit I talked to the European summit and there was a dialogue, a positive dialogue. I met with the British prime minister and Danish prime minister and the German leader, and I discussed with them some issues: increasing the support for Iraq until Iraq is capable of [recovery] and by canceling the debts, which ranges between 85-93%. And the minister of Finance and the governor of Central Bank will go to the Paris Club to discuss these issues." [translated by Russian Federal News Service]. Our current expectation is that the Paris Club is unlikely to deliver even the lowest figure in the range quoted by Allawi, but we will wait and see.

French Foreign Minister Michel Barnier writes today in a Wall Street Journal editorial: "The important thing now is to turn Iraq into a real success story. France has no other aim. It will not send troops there but it is ready to help... resolve the debt problem, and more broadly, to help prepare Iraq for elections in January."

November 07, 2004

In an interview with the New Standard, Naomi Klein says: "Next," Klein continued, "The US does have long term designs on Iraq, as expressed by attempts to lock in 40-year privatization contracts [and] saddle the next government with [International Monetary Fund]-imposed ‘reforms’,"she says that a "meaningful democracy" can only be brought about through a reversal of plans the US has in store for Iraqis. "One step would be immediately overturning [former occupation chief Paul] Bremer's economic laws that allow foreign corporations to come in and buy up Iraq." The other "pre-conditions for genuine democracy" proposed by Klein are debt relief and reparations for the war and sanctions. "Iraq is saddled with a debt that guarantees a future shackled to the agendas of its foreign creditors," she said. "Rather than paying Saddam's debts, or the occupation's debts, Iraq needs to receive massive war reparations for an illegal invasion, occupation, and for twelve years of brutal sanctions."

November 05, 2004

Speaking at the EU summit in Brussels Iyad Allawi made a plea for greater assistance for Iraq’s attempts at economic recovery and reconstruction, especially for efforts on the debt burden. Iraq could not create security without "jobs and economic opportunities for all" which his country could not create with "one arm tied behind our backs" because of the debt.

There was some controversy over his description of non-Coaliton countries as "spectators" however Germany Treaurer Gehard Schroeder responded to the media by mentioning Germany's support for partial debt relief, saying ambigiously: "We're not talking about just forgiving debts; we can't be that generous anymore. But we do want to make sure that Iraq's substantial resources aren't used just to pay off debt, but to rebuild the country. We want to contribute to that."

With the new $437m IMF loan and the forthcoming Paris Club treatment of the debt, the creditors will have strong levers of control to force Iraq to adopt the kind of economic policies they favour. This demand for structural adjustment conditionality is reflected most clearly in the IMF board’s press release of 30th September which includes: Iraq must have "a prudent fiscal policy that aims to limit spending to provide the minimum adequate level of social support." It insists on: "The implementation of key structural reforms to transform Iraq into a market economy.. in which progress must be made in 2005... including tax reform, financial sector reform, restructuring of state-owned enterprises." These priorities of the IMF are reflected in more detail in the Letter of Intent of 24th September which states, among other things:

"21. In the area of structural reform, a new foreign direct investment law was enacted that allows ownership in most sectors of the economy (except natural resources, real estate, and insurance) providing national treatment for foreign firms." Which links with: "36. We recognize that many state-owned enterprises are not viable as currently structured… We are committed to complete this analysis by end-2005, with the aim of producing plans for reforming or restructuring these enterprises.” This is not made explicit, but almost certainly means privatisation. Also connected is the removal of capital flow controls: "45. The government remains committed to an open trade and exchange system. In that regard, we are taking steps to become a full member of the World Trade Organization. Looking forward, the government will avoid imposing restrictions on payments and transfers for international transactions [or] introduce new or intensify trade restrictions."

"32. By end-2004 the government will increase the domestic prices of oil derivative products (including gasoline), a measure that is expected to bring US$1 billion in revenue in 2005. This initial adjustment is part of a plan to bring domestic energy prices to cost recovery levels by end-2009. The government believes that this step will demonstrate the willingness of Iraqi people to implement fundamental reforms." In other words subsidies on fuel will be phased out completely over five years, at which point the price of petrol in Iraq will be similar to the price in US. The next section on "broadening the tax base" mentions new taxes, including on cell phones and cars, which will affect a large part of the population. "35. The government considers the current level of salaries and pensions as generally sufficient, and will limit the overall wage and pension bill to US$3.7 billion in 2005-2006."

A section that may be the most serious, depending on its details is: "37. The government is also committed to enhance the effectiveness of the social safety net by moving over the medium term from a food ration system to a cash distribution system targeted at the poor and unemployed." This might be sensible, however the danger is that the definition of "the poor" could be much narrower than the current ration system and the amount of "cash distribution" could be less compared to the current ration. The World Food Program recently estimated that 25% of families are dependent on the ration and would face serious nutritional problems without it, while War Child's estimate for the Southern four governates is much higher – 76% of families there are dependent on the ration.

November 03, 2004

Jordan's prime minister Faisal al-Fayez signed agreements with Iyad Allawi setting the stage for closer security, economic and political cooperation between the two countries. He said "Jordan is willing to provide all forms of support to brotherly Iraq to bolster its reconstruction efforts, achieve economic prosperity and move toward consolidating security and stability to its citizens." al-Fayez said he and Allawi would agree at a later stage on a mechanism by which Iraq would repay debts to Jordan.

November 02, 2004

A revealing passage, refering to the Iran-Iraq war period: "More weapons were needed. A problem was the low price of oil. This hit Iraqi revenues and the pockets of previously generous allies in the Gulf. Iraq looked increasingly to the United States and Britain, along with Australia the only Iraqi creditors still being paid. After a visit to Iraq, Clement Miller, an Exim Bank credit specialist, reported that Iraqi officials told him not to worry "because Saddam Hussein himself has sent around a circular that said, very simply, 'Pay the Americans'." [Andrew Cockburn and Patrick Cockburn. Out of the Ashes: the resurrection of Saddam Hussein, New York: Harper Perenniel, 1999. p81]

Today Naomi Klein provides an update on the response to her exposure of the Baker/Carlyle plot to help Kuwait recieve reparations payments. She calls the Carlyle Group "gutsy" for insisting "Carlyle was never a member of the consortium" in the face of the leaked business proposal from the consortium to the Kuwaiti government - submitted almost two months after James Baker's appointment - in which the Carlyle Group is named no fewer than 47 times and James Baker is mentioned by name at least 11 times. In interviews, other consortium members, including Madeleine Albright's consulting firm, the Albright Group, confirmed that Carlyle was still involved, as did the office of the Prime Minister of Kuwait.

Klein wonders why the New York Times has not printed a word about Baker's conflict, despite the fact that when he was first appointed as envoy, it called on him to resign from Carlyle in order to "perform honourably in his new public job". The Kerry campaign has been equally silent, apparently for fear that any criticism would boomerang onto the Democrats because of Albright. This was Carlyle's stroke of genius: when Baker was appointed, the consortium recruited Albright to front the deal; when they got caught, Carlyle denied all involvement and left a prominent Democrat holding the bag.

November 01, 2004

In a statement to reporters after departure of the Iraqi president al-Yawar, Kuwaiti Prime Minister Shaykh Sabah said joint committees would hold meetings in the foreseeable future to discuss political, economic and social affairs. He indicated that debt was not discussed during the visit. "We have said before that we will take the necessary measures within the framework of the Paris Club."

The American Laywer interviews Lee Buchheit, of Cleary Gottlieb, who is representing the Iraqi Ministry of Finance and the Central Bank on debt. Extracts below:

Q. So what's Iraq's argument
A. There is this great debt burden that consists mostly of claims-quite old claims that date back to the Saddam regime. We have got to deal with them in a convincing way, so that they do not chill the foreign investment. I don't think anyone who has looked at that country believes that it could shoulder anything like the debt stock it now has. The difficulty is, for so long as the debt stock is there, it will cast a shadow, and the shadow keeps the investment from coming in, which permits the reconstruction, which in the end is the thing that makes any debt stock sustainable.

Q. Do you expect Iraq to access the capital markets
A. It is quite unlike some other countries, who express their goal in the restructuring as, "We want to get back to the markets." The reconstruction of Iraq is, I think, not something likely to be financed by the bond markets. It's going to be foreign direct investment-people who are in the business of building dams, roads, power plants. They need some assurance that the money they commit will be repaid. But if you ask me if Iraq will borrow in the capital markets in the medium term, I think they might.

Q. Will this restructuring be contentious
A. This is unlike some situations you see where there is a sense by the creditor community that the debtor is the author of its own distress, that it pursued undisciplined economic and financial policies. Iraq is, I think, viewed differently. There isn't that kind of bitterness or hostility.

Interim President Ghazi Al-Yawar arrived in Kuwait on saturday for the first visit by an Iraqi head of state in four decades. The Kuwait Times reports that "Kuwaiti officials however avoided giving a direct answer to questions on whether the state will consider reducing huge Gulf War reparations it seeks from Iraq. Asked if Kuwait will accept to reduce the compensation, parliament speaker Jassem Al-Khorafi said "Kuwait will not be outside any international measure" to be decided on this issue."