August 31, 2007

The IMF has published details of its latest "Article IV" review of Iraq. The most relevant passages are:

"18. Iraq has resolved most of its debt to Paris Club creditors, but progress in resolving debt to non-Paris Club official creditors has been limited. The authorities have signed bilateral agreements with all Paris Club creditors, except Russia, and nine (out of more than 30) non-Paris Club creditors. Six of these nine creditors (Czech Republic, Hungary, Indonesia, Malaysia, Romania, and South Africa) provided debt reduction comparable to the terms of the Paris Club agreement, while three others (Cyprus, Malta, and Slovak Republic) provided 100 percent reduction. In addition, the authorities have received confirmations from 20 countries that they do not have any claims on Iraq. The total debt to non-Paris Club official creditors is estimated at $67.7 billion, of which bilateral agreements have been signed for an amount of $3.4 billion. The bulk of unresolved debt (more than 80%) is to the Gulf countries and China."

"20. Iraq has resolved most private creditors’ claims through debt and cash
exchanges. By mid-2007, Iraq had settled more than $19.7 billion claims submitted by private creditors. Almost two-third of the remaining claims were withdrawn or cancelled during the process of reconciliation and settlement. Most of the unresolved claims (about 4% of total claims) are being reconciled with claims that are being settled as part of the liquidation of the London branch of Rafidain Bank."

In the Appendix on debt, the report notes: "By assuming that debt reduction comparable to the Paris Club agreement is applied to non-Paris Club creditor’s claims, the latest estimates of external debt indicate that the stock of debt was $69 billion (220% of GDP) at end-2005 and $55 billion (111% of GDP) at end-2006. Without the third stage of debt reduction, external debt would increase to about $62 billion (about 55% of GDP) by 2012. The third stage reduction (expected in 2008) would further reduce Iraq’s external debt to about $36 billion (32% of GDP) by 2012... Iraq’s external debt remains vulnerable to a negative oil shock, particularly when Iraq will start repaying the debt to official creditors. Based on the Paris Club agreement in 2004, the repayment of the remaining debt stock would start in 2011; the interest payments accrued during 2005–10 are mostly capitalized. The debt service would be relatively small until 2010 before it increases to about 10% of exports in 2011. Simulations for two oil shocks... show that Iraq would require significant borrowing from international markets to close the financing gaps."

August 09, 2007

Russia is continuing to use the issue of its odious loans to Saddam in the 1980s to put pressure on Iraq to grant it control of oil fields, either through dubious contracts signed with Saddam or new contracts under the controversial and as yet not-passed Hydrocarbons Law.

Iraqi Oil Minister Hussein Sharistani is on a visit to Moscow. Ivan Groshkov writes today in the Russian newspaper Nezavisimaya Gazeta (translation by BBC Monitoring):

"Moscow intends to settle Baghdad's $10-billion debt and regain the right to the oil contacts signed under Saddam Husayn. These are the main topics of conversation for Iraqi Oil Minister Husayn al-Shahristani, who arrived in Moscow yesterday on a three-day visit... Deputy Finance Minister Sergey Storchak said recently that the fate of the $10-billion debt which Iraq owes Russia, mainly for deliveries of military hardware, is dependent upon the outcome of Al-Shahristani's visit. He pointed out that the debt agreement is already ready and voiced "cautious optimism" that the document may be signed "by the end of the year." At the same time Storchak stressed that much will depend on the resolution of the issue of the oil contracts concluded in Saddam's time... It is worthy of note that there is already a precedent for "reviving" a Saddam oil deal. Last June during a visit to Beijing Al-Shahristani resumed a contract with China which was also signed in 1997. In the process the PRC also stated its readiness to write off a "considerable proportion" of its $8-billion Iraq debt."