August 31, 2005

Uganda is asking for the reduction of SH13.6bn ($7.5m) debt owed to Iraq from money loaned to the Idi Amin and Milton Obote governments to rehabilitate the agro-based industries. State Attorney Angella Kiryabwire said yesterday that the government was seeking audience with Iraq's lawyers in New York, Clearly, Gottlieb and Hannington Advocates, to plead for the debt relief. Iraq's attorney Matthias Nalyanya said the government had been talking about debt relief for a long time.

August 25, 2005

Reports are coming in that Bulgaria has agreed to write off $340m out of its $1.7bn claim. This is presumably the first tranch under the Paris Club terms, implying Bulgaria has signed an agreement similar to the one by Romania a few days ago.

August 18, 2005

Romania is the first non-Paris Club country to sign a comparable debt relief agreement with Iraq, cancelling about $760m immediately out of $2.5bn claims, and offering a further $1370m of cancellation conditional on IMF requirements as stipulated by the Paris Club. This will leave around $500m to be repaid over 23yrs with a 6 year grace period. Mr. Dragos Neacsu, Secretary of State with the Ministry of Public Finance, said: "Romania considers this agreement as an important precedent for the constructive resolution of the Iraqi debt towards countries that are not members of the Paris Club. It also represents more than a financial settlement, as it should trigger the re-launching of the business development between our two countries."

While Jubilee Iraq considers the Paris Club's level of relief insufficient both economically and from a consideration of the odiousness of much of the debt, and oposes IMF conditionality, this is nonetheless a significant development from Romania which is one of the least wealthy of the creditor countries and had in the past argued strongly against any debt relief.

August 16, 2005

Today the IMF announced the completion of its regular Article IV report on Iraq, the first since 1980. The report noted that grant-financed reconstruction "fell significantly short of expectations. Although donors to the International Reconstruction Fund Facility for Iraq deposited about $1 billion into this facility, only about $103 million were disbursed to finance projects in 2004." It said further debt relief is needed for Iraq to become economically stable, although at the same time hinted at new IMF loans. The report repeated a familiar IMF demand that Iraq repeal domestic subsidies on petroleum products.

There is a summary , the full report (pdf 800kb) with statistical appendix (pdf 100kb). There is also a press briefing with Alan Bennet, Ass. Director of the Middle East department. A full Jubilee Iraq analysis shortly.

August 13, 2005

The word on the street in Baghdad is that the US is putting pressure on Iraqis not to include a provision for direct regional allocations of oil revenue (a key demand of Kurds and Basrans). The reason for this is that they want all the revenue on the books of the central government to guarantee existing debt and enable the IMF to make the maximum new loans.

Seperately Noah Feldman said, in an interview about economic aspects of the constitution a few weeks ago, that "The IMF or the World Bank are in a position to impose certain conditions as a prerequisite for aid...[but] we’ve seen this throughout the world, that various decisions that the government needs to take tend to have more buy-in from the public if they’re perceived as having been made domestically rather imposed by the international organizations that control inflows of capital."

August 12, 2005

John Dizzard of the FT comments on the Iraqi offer to settle commercial debt. He reports that syndicated commercial bank loans are trading at 27% while letters of credit issued by Iraqi government-owned banks, the other main class of commerical debt, are at 16-17%, up from 12-14% at the start of the year (a 20% profit for anyone who bought them then). "This does not make sense, since Iraq announced that the letters of credit issued by the government banks would be treated as equal in seniority to the loans. When you take past due interest into account, the price reduction of the 80% write-off, it would seem as though anyone buying the bank loans now would lose money when their debt was exchanged for new paper, while the letters of credit holders would make money." He also notes that the offer to ay 10.25% in cash to holders of $35m or less, is based on a Discount Rate of just under 12%, the first estiamte of a political risk premium for Iraq. Dizzard continues "For all the car bombs in the headlines, there are those who would prefer to take the paper rather than the cash. Andrew Chappell, a trader at Exotix, the London-based broker that is the largest trader in Iraqi paper, puts it: “A lot of people remember that it was possible to buy Serbian debt at 9 cents on the dollar, and that is now trading at around par. At numerous stops along the way it was said that Serbia was fully valued at, say, 25c. You simply don’t know.”

August 09, 2005

The LA Times reports that one of the conditions of the Paris Club debt relief agreement is an end to fuel subsidies by December. It says this is now being renegotiated because Iraqis also fear that disaster would result from a sudden boost in fuel prices. "Only a crazy man would increase the price at this time. The Paris agreement is not a verse in the Koran. We should take a year or two and gradually increase the price." Said Karim Shamma, an energy consultant and former Oil Ministry official.

August 08, 2005

As a result of the poor state of Iraq's refineries, it has been importing fuel from neighbours, including Turkey. Today Turkish State Minister Kursad Tuzmen warned Turkish businessmen exporting to Iraq, that it's exceeded $800m. In an interview Tuzmen said: "We have launched a series of initiatives in the Iraqi government for repayment of those debts... Turkish firms meet most of Iraq's requirement for petroleum products. Exports of petroleum products to Iraq from June of 2003 to June of 2005 reached 7.7 million tons. The Iraqi side does not provide any guarantee for those products. Such a situation causes serious problems for Turkish firms. Iraq's debts reached 900m dollars in May. As a result of our initiatives, Iraq repaid 390m dollars. Since exports from Turkey to Iraq have been continuing, and Iraqi authorities have failed to fulfil their commitments, the debts exceeded 800m dollars again." These post-Saddam debts to Turkey and other countries are unlikely to be odious (unless there is significant corruption involved) but must be included in any assessment of Iraq's debt burden.

August 04, 2005

An Italian bank, BNL, is suing the Iraqi government in Fulton County Superior Court, Georgia for $1.38bn loaned to Saddam (Feb 1988 - April 1989) plus interest and litigation. Those loans, which originated in the Atlanta office of Banca Nazionale del Lavoro, were at the center of an international scandal commonly referred to as "Iraqgate," during which critics blamed the first Bush administration with arming Saddam's government in the late 1980s.

Although Justice Department inquries cleared the Bush administration, many continue to speculate over how Atlanta bank employees lent Saddam billions of dollars. some of which was backed by the U.S. government through two agricultural programs, without the knowledge of their superiors in Rome or any high-ranking American officials. Christopher Drogoul, the manager of the branch, pleaded guilty in 1993 to two counts of lying to the Federal Reserve Board and one count of mail fraud and was sentenced to 37 months in prison. Senior Judge Marvin H. Shoob of the U.S. District Court for the Northern District of Georgia oversaw a portion of the Justice Department's prosecution of Drogoul. Shoob said today he believed the local bank officials were "small potatoes" in a larger conspiracy.

The lead attorney representing BNL is Walter W. Driver Jr., chairman of King & Spalding, who has represented the bank in all the cases since 1989.

Today the IMF accepted Iraq’s Monetary Survey, including data from the 26 banks under the direct supervision of the Central Bank. The completion of the Monetary Survey is a Structural Indicative Benchmark of the Emergency Post Conflict Assistance loan made in September 2004 and will be used in negotiations relating to the IMF Standby Facility for Iraq expected next month. Jubilee Iraq is concerned in the extent to which the IMF is forcing Iraqis to make particular economic policy choices, particularly when Saddam's odious debt is used as the justification for this, and has argued consistently for Iraqi autonomy in economic decision making. The IMF's advice is appreciated, its orders are not. On August 16 the IMF is expected to announced the results of its Article IV report on Iraq.