1. Facts > 2. Politics > 3. Action
Sources: Thomas | White House News; Iraq | State Department

1. Facts

• Debt: $5bn, Reparations: $3.4bn
• About $3bn of the debt is claimed by the US Department of Agriculture. In 1988 alone $1.1bn was loaned, 25% of all USDA loans that year (source). Rep. Marcy Kaptur (Ohio) is suspicious that that more than grain - anthrax and other weapons - may have been purchased in the US with these loans (source).
• In June 1990 (two months before the invasion of Kuwait) the Administration was blocking attempts by Congress to impose sanctions on Iraq, according to a report that year by the General Accounting Office, the investigative arm of Congress. The report said: "The U.S. desire to build a strategic and agricultural trade relationship with Iraq seemed to have outweighed the apparent financial risks involved with providing credit guarantees and to discount evidence of Iraq's human rights violations." (source)

2. Politics

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Summary:

After some mixed signals (see Colin Powell's comments in Russia, and Russian media reported on 22nd May that the US bought Russia's vote at the Security council on SC 1483 for a promise of debt payments from Iraq), and a disappointing amount of new funding at the Madrid donor conference, the US has now put reduction of the debt near the top of its agenda with the appointment of James Baker III as special envoy on this issue. It should be stressed though that the US has not yet written off it's own large debt and reparation claims. There was considerable debate over the Appropriations Bill, with the Senate and many in the House wanting to make reconstruction loans rather than grants. The legal status of such loans would have been dubious, and thankfully the Bill finally passed with the original commitment to grants. Paul Bremmer is a firm supporter of debt cancellation. Representative Maloney introduced the Iraqi Freedom from Debt Bill into the House in July, which ephasises the odious nature of Iraqi debt. The Bill rapidly gained the support of many leading Republicans and Democrats.

• President Bush (on appointment of James Baker) "Secretary Baker will report directly to me and will lead an effort to work with the world's governments at the highest levels with international organizations and with the Iraqis in seeking the restructuring and reduction of Iraq's official debt. The future of the Iraqi people should not be mortgaged to the enormous burden of debt incurred to enrich Saddam Hussein's regime. This debt endangers Iraq's long-term prospects for political health and economic prosperity. The issue of Iraq debt must be resolved in a manner that is fair and that does not unjustly burden a struggling nation at its moment of hope and promise." (5th December).
• Iraq Appropriations Bill Senate initially votes to convert grants to loans (17/10/3), but thankfully this is eventually removed from the final bill. (30/10/3)
• Paul Bremmer: Iraq has almost $200 billion in debt and reparations hanging over it as a result of Saddam’s economic incompetence and aggressive wars. Iraq is in no position to service its existing debt, let alone to take on more. Mountains of unpayable debt contributed heavily to the instability that paved Hitler’s path to power. The giants of the post-World War II generation recognized this and Marshall Plan assistance was overwhelmingly grant aid. (22nd September)
• Peter McPherson (head of economic reconstruction) Declined to say where in the range of estimates the actual debt lies. "It is overwhelming. Even the smallest number is crushing." Although chasing Hussein's hidden bank accounts and finding caches of gold has grabbed headlines, McPherson says, those amounts are small compared with what a tough debt reduction campaign can yield for Iraq. The debt talks will eventually be handled by a new Iraqi government, McPherson says. In the meantime, he says, his experience in negotiating on behalf of Bank of America in the 1980s will help him deal with Iraq's creditors. "These negotiations, on the creditor side, I've been in on," he says. "Now I'm on the debtor side." (2nd July).
• John Taylor (Treasury undersecretary for International Affairs): He has previously said that Iraq may need to treated like other post-conflict countries such as Serbia which have received major debt write-offs. However at the WEF meeting in Jordan he backtracked and said there should be no one method to treat Iraq's external obligations."There has to be some flexibility. Some countries might want to reduce the debt or reschedule in different ways than others." (21st June)
• Jay Garner (former head of OHRA): Told reporters after a Senate Armed Services Committee meeting on the resurgence of Ba'athists that if a new Iraqi government has too much debt, "then we're running a parallel, I think, akin to what happened to Germany at the end of World War I, where the reparations were so great that it led to the events in the '30s and '40s." (20th June)

• Congress - Iraqi Freedom from Debt Bill (House Resolution 2482 - Proposed by Carolyn Maloney D-NY and Jim Leach R-IA): The Bill was introduced on 17th June and instructs the Treasury Secretary to influence the World Bank and IMF to cancel or radically reduce the c$150 million of debt owed to them. The legislation also includes a sense of Congress asking the President to urge other public and private creditors to relieve Iraq of its debts. “There is a powerful moral case for relieving the Iraqi people of the debts incurred by Saddam’s murderous regime.” said Rep. Maloney. Jubilee Iraq welcomes the explicit recognition in this legislation that much of Saddam's debt is odious, the text reads "A significant amount of Iraqs outstanding loans were taken out at the behest of Baath Party leadership and rather than being used for the benefit or the well-being of the Iraqi people were used for building lavish palaces, secret police, prisons, and illegal weapons programs. According to international precedent, debts incurred by dictatorships for the purposes of oppressing their people or for personal purpose may be considered ‘‘odious’’. In cases where borrowed money is used in ways contrary to the people’s interest, with the knowledge of the creditors, the creditors may be said to have committed a hostile act against the people. Under such reasoning, such debts may be questioned." (17th June)

• Richard Perle (influential Pentagon adviser): "The first thing we should do to build a new Iraq, in my view, is forgive the existing Iraqi debt. This is money that should never be collected. If you loan to a dictatorship, don't expect to be repaid if a democracy emerges...If the French banks, the German banks and some American banks are unhappy about that," Perle said, then they would have learnt a lesson about the "moral hazard. . . of lending to a vicious dictatorship." The Financial times notes that Perle was not speaking on behalf of the US administration, but in a personal capacity. Jubilee Iraq notes that Perle's comments are similar to those made by his Defence Department ally Paul Wolfowitz back in April. They differ markedly from the view of others in the Administration such as Colin Powell who told Russian radio that he expected Iraq to pay Saddam's debts. (1) Very little is owed to banks, the vast majority is to countries, including the US and in particular to the US's Arab allies Kuwait, Saudi and the other Gulf states. (2) The focus on France and Germany, who together hold probably less than 5% of the debt, is very unhelpful. It is welcome however that Perle acknowledges that American banks were among the lenders. The Regan Administration was also a major lender, of around $4bn. (3) Perle is correct that cancellation of odious debts is morally right and will teach banks and countries a valuable lesson about financially support for dictators. (11th June)
• Alan Larson (Undersecretary of State): "When the time comes it's going to be necessary to give substantial debt relief to Iraq" (4th June). Speaking at the House Committee on International Relations he answered a question on debt:"for the time being it would be unreasonable" for creditors to expect payments for the debt of Saddam Hussein's regime. "While the issue needs to be analyzed further in terms of Iraq's capacity to pay and the nature of these debts, it is my firm expectation that very, very substantial debt relief will need to be extended, and should be extended, to Iraq," (15th May). "I think that very very generous debt relief is going to be required." He hinted that this should include the reparations "That's not a business of the Paris Club but yes, part of the external obligation of Iraq," he said. (18th April)
• Paul Bremer (Head of Coalition Provisional Authority): Called on countries that lent Iraq money when it was run by Saddam Hussein to forgive those obligations because the country should not be forced to use its resources to "service crippling debts." He called for a "substantial reduction" not just deferral of payments but offered no specific debt forgiveness proposals. (2nd June, source2)
• Peter McPherson (Treasury's official in charge of rebuilding Iraq's financial sector) talked about the need for ''very substantial'' debt relief. ''The debt as it stands would be crushing to service.' (24th May).
• Philip Carroll (US advisor to Iraqi oil ministry) said, "I see no barriers to French, German, Russian or Chinese assistance [in rebuilding Iraq's oil industry]. In fact, if those countries, which, by the way, are owed substantial monies by the old regime, it would be a wonderful thing in my mind if they forgave those debts." (18th May)
• Colin Powell: During an interview on Radio Echo Moskvy he was asked ""How do you see Iraq’s debt to Russia? We are talking about a debt calculated at $8 billion, what is your solution to this problem? Did you discuss this with Mr Putin or Igor Ivanov?" Powell replied "We did not discuss this question yesterday. I am familiar with this question., because Mr Ivanov and I have talked about it before. According to our statistics, Iraq owes various countries from $100 billion to $120 billion. And $8 billion of this figure is owed to Russia. And in trying to find a solution to this problem, we would like to find the best solution possible, and perhaps to find a way of increasing the timescale of repayments perhaps by refinancing or something else. I do not doubt, that the Iraqi government will fully honour its commitments to the Russian Federation." (15th May - link in Russian)
• John Snow (US Treasury Secretary) said that G7 officials "began substantive discussions about how our nations and the international institutions can work together to help the Iraqi people recover -- not just from 25 days of conflict, but from 25 years of economic misrule." The ministers "had useful discussions about how to proceed with the Iraqi debt -- recognizing that the Iraqi people cannot bear the burden of current debt levels -- and we recognize the need of the Paris Club to begin to address this issue." (12th April) "The people of Iraq shouldn't be saddled with those debts incurred through the regime of the dictator." Responding to the question "would be an advocate for forgiving those debts?" told Fox News "I'd be an advocate for a process that works those debts down, that's right. The precise way to do that I think is still to be determined, but clearly some debt relief is in order." - (10th April)
• Richard Boucher (State Department spokesman): "[debt is] an issue that arises in all our discussions. It's been a long time since Iraq has been paying any of its debt. And there are international mechanisms for dealing with those situations that we would expect, at the appropriate time, the international community might use." - 11th April
• Paul Wolfowitz (Deputy Defence Secretary): Urges France & Russia to forgive debt which was "lent to the dictator to buy weapons and to build palaces and to build instruments of repression." - 10th April.
• Ari Fleischer (White House Press Officer): sidesteps question about forgiving debt - 2nd April.
• James Pardew (Ambassador to Bulgaria) announced that the US would help Bulgaria receive its debt from Iraq - 24th March & 10th(?) April
• George Bush: He has made many commitments to ensuring the freedom and well being for the Iraqi people (e.g. 8th April). These promises cannot be fulfilled without debt freedom. However Bulgarian Prime Minister Simeon Saxe- Coburg Gotha says that when he raised the issue of the Iraqi debt to Bulgaria during a visit to Washington in February "The President clearly and firmly stated that the countries which helped in the joint effort... are to be in the first places to get their money back." (26th February).
• Senator Joe Lieberman (Democrat-Conneticutt) called for an international conference on Iraqi debt relief in a speech today to the Council on Foreign Relations - 26th February
• Alexander Vershbow (Ambassador to Russia) told a press conference in Moscow last November that Russia can expect debt repayment after a change of regime in Iraq. - 27 November 2002

• Praise him for bringing the issue of Iraq's debt onto the agenda.
• Agree with his statement that "the people of Iraq shouldn't be saddled with those debts incurred through the regime of the dictator." (10th April).
• Remind him that the the US granted Germany significant debt cancellation after World War II, a significant part of the Marshall Plan which helped that country become a strong and prosperous democracy - precisely our hopes for Iraq.
• Ask him to act in line with his 10th April statement and commit to writing off all US debt and reparation claims.
• Remind him that Iraqis do not favour the Paris Club process, which ignores the origins of debt, is secretive and makes debt restructuring dependent on handing over control of economic policy to the IMF.
• Ask him to support the establishment of an odious debt arbitration tribunal, as proposed by Jubilee Iraq, and to encourage Paris Club members and other creditors to put their claims to arbitration.
• In particular, ask him to raise this issue with America's Gulf allies - Kuwait, Saudia Arabia and UAE - who hold the vast majority of financial claims against Iraq.

See also Jubilee USA's draft letter on this subject.

Address: Treasury Secretary John Snow, 1500 Pennsylvania Avenue, NW, Washington, D.C. 20220
You could also try: Phone: (202) 622-2000 and Fax: (202) 622-6415
General advice on writing to politicians

You could also write to:

• George Bush if the Iraqi people have been freed from Saddam only to be enslaved to Saddam's debts, then his promises to them of liberation will have proved very hollow.
• Your Representative: (contact Congress). Ask them to lobby in Congress for debt cancellation.