Thread: Archive Latest News - Think Tank - 15/04/08 - 26/08/08

Western Countries Cancel Iraqi Debt, Gulf Countries Don't

Introduction

During the long years of Saddam Hussein's rule in Iraq, economic data were treated as top national secrets, and the revelation of such data to unauthorized persons could bring the death penalty. Therefore, it was only after the fall of the regime that the extent of Iraq's enormous sovereign debt, estimated at the time in excess of $120 billion, was to become a public record.

After the invasion of Iraq in April 2003, it became evident that the country's economic and social development could not be initiated with so much external debt overhang, and the issue was taken up by the Paris Club.

At the September 2003 meeting in Dubai of the G-7, the finance ministers [1] called on the Paris Club "to make its best effort to complete the restructuring of Iraq's debt before the end of 2004." According to U.S. figures, Iraq owed Paris Club members approximately $40 billion. Of this amount, $21 billion was principal and $19 billion was interest. The IMF estimated Iraqi debt held by non-Paris club governments - primarily the oil-rich Arab countries in the Persian Gulf - at $60 billion to $65 billion, and debt to commercial creditors at roughly $15 billion. [2]

The Paris Club Tackles the Iraqi Debt

The Paris Club is an informal group of financial officials from 19 of the world's richest countries, which provides indebted countries and their creditors such financial services as debt restructuring, debt relief, and debt cancellation. Debtors are often recommended by the International Monetary Fund after alternative solutions have failed. [3]

At its meeting on November 21, 2004, the Paris Club recommended a three-stage plan to reduce debt owned by Iraq by 80%. The first stage was to immediately cancel 30% of debt owned by Iraq to each Paris Club country. The second stage was to start the implementation of an IMF program following which another 30% would be cancelled. The remaining 20% of the initial stock would be abdicated upon completion of the last IMF program. [4] Most creditor countries, including the U.S., the U.K., France, China, and Russia, have adopted the recommendation, in full or in part. The oil-rich Arab Gulf countries have been the exception, despite many promises to the contrary.

Most recent data from the U.S. Department of State indicate that over the past three years, Iraq's debt has been reduced by $66.5 billion. With the participation of all members, the Paris Club cancelled a total of $42.3 billion. The U.S. cancelled 100% of Iraq's debt of $4.1 billion. Other Paris Club members agreed to cancel 80% of Iraq's debt. A number of non-Paris Club members have cancelled a total of $8.2 billion, on Paris Club terms.

Iraq's Failed Attempts to Resolve Debt Issue with Gulf Countries

The Iraqi Finance Ministry has sent several messages to the Arab countries, notably Kuwait and Saudi Arabia, confirming Baghdad's readiness to hold talks to settle the Iraqi debt. However, Finance Ministry director-general finance Muhammad Al-Hariri has noted bitterly, "We were expecting, for some time, that these states would resolve the issue and follow the path of several other countries around the world that have cancelled the debt due them from Iraq, but the Arab countries have remained bystanders." He added that the attitude of the Gulf states is "politically motivated, because some of these countries do not recognize the new changes in Iraq."

The Iraqi daily Al-Da'wa, issued by Prime Minister Nuri Al-Maliki's political party of the same name, has been far more explicit in its criticism of the Gulf countries for their refusal to cancel Iraqi debts. In an article entitled "Iraq Is Not Obliged to Pay Odious Debts," Rassim Qassim writes that most of the debts accrued by Iraq were "the result of actions by the previous dictatorial and unconstitutional regime, and they are primarily in the form of damages sustained by countries during the invasion and occupation of Kuwait or the result of wars and crises that led to the isolation that regime…" When that regime fell, writes Qassim, "it was assumed that countries which had opposed the previous regime and its programs would drop the odious [illegitimate] debt, and they are now asking the suffering Iraqi people to bear the responsibility of the actions of the despot [Saddam Hussein.]"

Qassim goes on to say that "the new Iraq - with its elected constitutional government and its democratic institutions - is not obliged to pay these debts and it is not obliged to acknowledge them… The civilized world and, specifically, Europe, has responded to the Paris Club, which cancelled 80% of the odious debts, and the European Union is trying to cancel the rest and open a new page with emerging Iraq. The international community has begun to view Iraq in a different perspective - as the sole country in the region that enjoys democratic, multi-party and constitutional parliament."

After underscoring Iraq's great economic potential, the author warns of "the impediments being placed on it by countries which have regimes that are incompatible with democratic orientation and which insist on retaining the false debts that were imposed on Iraq." He concludes by calling on the Gulf countries to reexamine their calculations and to keep in mind that "causing harm to Iraq would not endure, and what goes around comes around." [5]

Reflecting the same views, Hilal al-Ta'aan writes in the Iraqi government daily Al-Sabah that most of the loans given to Iraq by foreign and Gulf countries were made with the certitude that they had a military objective - to arm Iraq and support its war against Iran. [6]

The Doctrine of Odious Debts

The two articles echo the doctrine of "odious debts." Proponents of the doctrine asset that some of Iraq's debt could potentially be classified as non-legitimate under international law, since they were undertaken during the Hussein regime and that international law should be able to expunge these debts. Patricia Adams, who is associated with Probe International, a Toronto-based organization devoted to the issue of "odious debts," quotes Russian legal scholar Alexander Sack, who, in 1927, defined the Doctrine of Odious Debts, as follows:

If a despotic power incurs a debt not for the needs or in the interest of the State, but to strengthen its despotic regime… this debt is odious…. This debt is not an obligation for the nation; it is a regime's debt, a personal debt of the power that has incurred it, consequently it falls with the fall of this power. [7]

Reparations as Debt

Apart from the external debt, there is the issue of reparations to Kuwait and, to a lesser extent, to Saudi Arabia, stemming from the occupation of Kuwait by Iraq, the looting of the country and setting fire to its oil fields.

Following the occupation of Kuwait, the United Nations imposed sanctions against the Iraqi regime. Security Council Resolution 661, of 1990, prohibited all nations from buying Iraqi oil and from selling Iraq any commodities except food or medicines. Under the same resolution, the United Nations Compensation Commission (UNCC) was established as a subsidiary organ of the Security Council to process claims and pay compensation for losses and damage suffered as a direct result of Iraq's 1990-1991 invasion and occupation of Kuwait. Initially, 30% of revenues from the sale of Iraqi oil was to be channeled through the UNCC; that proportion was later reduced to 5%, and it has remained at that level, but with a larger revenue base. The Commission receives about $220 million a month.

There were approximately 2.7 million claims submitted, for a total of over $350 billion. Of these claims, 1.54 million (57%) resulted in some sort of award. The total approved by the UNCC was $52 billion. In March of this year, the UNCC paid out $972.4 million, bringing the total to $24.4 billion. Kuwaiti companies and state entities received the lion's share of the latest round of compensation, amounting to $725.1 million, followed by Saudi Arabia with $148 million, the U.S. ($76 million) and Turkey ($23.3 million). Another $28 billion remains to be paid to settle all outstanding claims.

The Commission has adopted a policy of paying individuals first, with the result that the remaining sum is owed to government entities (including state oil companies) of Kuwait and Saudi Arabia.

Kuwait, which has received nearly $14 billion from the UNCC, is still owed about $27 billion, or almost all of the remaining outstanding compensation of $28 billion, to be paid by Iraq through the UNCC.

Conclusion

There is no doubt that Kuwait suffered enormously as a result of its occupation by Iraq and the brutal administration, established by Saddam Hussein, that followed. The country was systematically looted, many of its citizens were murdered or taken as prisoners to Iraq without leaving a trace. Reparations were justified. But how much reparations should be assessed, and collected, should be negotiated in a spirit of generosity as befit two neighborly Arab countries that must live side by side for a long time.

The issue of debt is of an entirely different genre, because loans extended to the Iraqi regime during the Iraq-Iran war were equally beneficial to lender and borrower alike, and this factor should be kept in perspective as the parties seek to bring the issue to a close. A strong and prosperous Arab Iraq may serve again as a dam against a raging Persian tide that threatens to sweep the Middle East in its wake. And this factor, above everything else, could only be ignored by the debtor nations at their own peril.

*Dr. Nimrod Raphaeli is the Editor of The MEMRI Economic Blog, www.memrieconomicblog.org .

Iraqi PM vows to impose order in al Qaeda haven

BAGHDAD, May 15 (Reuters) - Prime Minister Nuri al-Maliki vowed on Thursday to impose law and order in northern Iraq and said an offensive against al Qaeda militants would end the "dark days" of shootings and bomb attacks.

Maliki flew to the northern city of Mosul on Wednesday to supervise a push against the Sunni Islamist militant group in what the U.S. military says is its last major urban stronghold.

Buoyed by the success of a recent operation against Shi'ite militias in the southern oil city of Basra, the prime minister said Iraq could not just rely on other countries for help, an apparent reference to the large U.S. military presence in Iraq.

"We have come to Nineveh to restore security," Maliki told reporters in Mosul. "Today, law and order is our message. We want to end the suffering in this province."

Iraqi officials hope the campaign, which started on Saturday and which is led by Iraqi security forces, will deliver a knockout blow to al Qaeda fighters where they have regrouped in Mosul and the surrounding province of Nineveh.

Maliki spoke after meeting senior military officials in Mosul to draw up plans to hunt down the militants.

"We have been through dark days, days marked by outlaws and groups with guns ... but this operation will succeed," he said.

Defence Ministry spokesman Major-General Mohammed al-Askari said one of the objectives was to round up wanted insurgents.

Iraqi military officials have said some 500 suspects had already been detained in raids in Nineveh so far.

Maliki appears to be trying to show that Iraq can increasingly take care of its own security without constantly turning to the 155,000 U.S. troops in the country.

Iraq's security forces have grown to more than 500,000 under U.S. training. American commanders say they have made progress but still have a long way to go before they constitute a professional fighting force.

"The solution to Iraqi problems is in our hands. He who runs to other countries to solve his problems is making a mistake," Maliki said.

Iraqi PM vows to impose order in al Qaeda haven | Reuters

Jordan to set up joint Border Free Zone with Iraq

Jordan is ready to establish a joint free zone at the Karama border with Iraq to facilitate increasing flows of goods on border, said an official of Jordan's free zones authorities after a meeting with his Iraqi counterpart.

The free zone is expected to cover a few hundred dunums (1 dunum = 0.1 square km) of land bordering Iraq, said Mahmoud Qteishat, director general of Jordan's Free Zones Corporation, added that "As long as the security on the road from Amman to Baghdad keeps getting better, business will improve."

The trade momentum between Jordan and Iraq is "good" and is supposed to witness a ***** increase if the security is improved in the war-torn country, Qteishat said.

The idea was introduced two years ago by the Jordanian-Iraqi Higher Committee but delayed since the security situation in Iraq blocks the meeting of both sides.

Free zones in Jordan started in 1973 when a small free zone was established in Aqaba Port to develop international commercial exchange and serve transit trade.

http://www.iraqdirectory.com/DisplayNews.aspx?id=6121

Breaking up the Iraqi-Jordanian Company for Land Transport

Jordanian officials in the transport sector confirmed solving the Iraqi-Jordanian Company for Land Transport because of the accumulation of its debts and the oldness of its fleet.

Chairman of the liquidation committee, Sabr Al-Ruwashdah, said that the committee will soon start liquidating the assets of the company through the sale of its shares, trucks and all its properties, adding that the company's employees whose services were terminated under the liquidation will receive full rights according to the law pending the availability of liquidity in the company.

Jordanian Transport Minister, Alaa Bataineh, stressed the government's keenness on helping some staff who are about to reach the legal age for retirement, by taking advantage of some of them in different locations.

Breaking up the Iraqi-Jordanian Company for Land Transport

2nd Iraq Business and Investment conference concludes in Cairo

Iraq’s Vice President Adel Abdul Mahdi announced the conclusion of the 2nd Iraq Business and Investment conference in Cairo on Friday with the signing of a number of contracts with Arab and foreign businessmen and companies.

"I think we have come up with substantial and significant results as a number of contracts were signed with Arab and foreign companies and businessmen," Abdul Mahdi told the concluding session of the two-day conference.

He added "agreements and understandings were also reached with many large companies that will race to work and invest in Iraq."

"Iraq has no choice now but to make success," said Abul Mahdi noting that Iraq "today is not to choose between failure and success, its only choice is to succeed at the lower cost and shorter time,"
He said, "We are continuing on our way forward."

Abdul Mahdi addressed the audience saying "to those who love Iraq and want to work in Iraq, we dismissed all forms of factional and sectarian division and we want to build an Iraq with a big role as an abode of peace and a place of wisdom."

Iraqi Vice President who thanked both Egyptian President Hosni Mubarak and Prime Minister Ahmed Nazif for their support for the conference invited the Egyptian investors to work in Iraq.

On Thursday, the 2nd Iraq Business and Investment Conference (IBIC) opened in the Egyptian capital Cairo with the aim of discussing Iraq's main economic issues and the role of businessmen in the economic process.

The Conference was attended by 200 Egyptian businessmen and investors in addition to 630 participants from Iraq and other countries.
The first IBIC was held in Dubai in 2007 with the participation of prominent Iraqi and Arab figures. One of the recommendations of the Dubai conference was to support the Iraqi economy by all means.

Aswat Aliraq

Oil ministry says picked corporations to up production to 3m. bpd

The Iraqi Oil Ministry picked a number of corporations to sign contracts with in order to up oil production by 500,000 barrels per day (bpd) to reach 3 million bpd, the ministry's official spokesman said on Saturday.

"The ministry has hatched a new plan as talks are now underway with six global corporations on Iraqi oil contracts. More than 120 companies have presented offers, but only 35 were selected," Aasem Jihad told Aswat al-Iraq – Voices of Iraq – (VOI) by telephone.

"The ministry seeks to attain the objective of adding 500,000 bpd to the current production rates of 2.500 million bpd within the next year and a half," Jihad said.

He had told VOI on Thursday that the volume of Iraq's oil exports has reached 57 million bpd in April 2008 compared to 59.400 bpd in March 2008, a registered decrease of 2.5 million bpd.

"The decrease is actually blamed on the security conditions in Basra during last month and the vandalizing of several pipelines," he explained.

The export rates of last month were put at 1.460 million bpd from the southern fields via the ports of Basra and Khour al-Amiyah while the oil exported from the northern fields via the Turkish port of Ceyhan was 442,000 bpd, he added.

"The planned production during the month of June 2008 would hopefully reach 2.5 million bpd – 1.800 million bpd from the southern oil fields and 600,000 bpd from the northern fields in Kirkuk, 250 km north of the Iraqi capital Baghdad," Jihad said.

The oil-rich port city of Basra, 590 km south of Baghdad, had witnessed last March a military campaign under the name Saulat al-Forsan (Knights' Assault), which aimed to impose the state power on the city and hunt down "outlaws".

The operation left hundreds dead or wounded on the sides of both the government forces and gunmen believed to be loyal to Shiite leader Muqtada al-Sadr.

Aswat Aliraq

Failure to apply art. 140 would have grave consequences – KRG

Failure to apply article 140 of the Iraqi constitution on Kirkuk would have "grave" consequences, the official spokesman for the Kurdistan Regional Government (KRG) said on Saturday.

"There would be grave political and security consequences for the Kurds in particular and the Iraqi people in general if article 140 was not applied," Jamal Abdullah told Aswat al-Iraq – Voices of Iraq – (VOI).

"There can be no reliance on the time element in settling complicated issues like Kirkuk. Any decision regarding article 140 has to be discussed with the Iraqi Kurdistan leadership as well as all parties and political blocs before starting to enforce it," said Abdullah.

Some Iraqi parties believe that article 140 could not be applied due to the expiry of its legal period. Kurds, however, argue that the parties who say this want to "evade" implementation of the article on the grounds that the "time frame" set by the Iraqi constitution has to do with "implementation, not commitment."

Article 140 of the Iraqi constitution is related to normalization in Kirkuk, an important and mixed city of Kurds, Turcomans, Christians, Arabs and Assyrians.

Kurds seek to include the city into the autonomous Iraq's Kurdistan region, while Sunni Muslims, Turcomans and Shiites oppose the incorporation. The article currently stipulates that all Arabs in Kirkuk be returned to their original locations in southern and central Iraqi areas, and formerly displaced residents returned to Kirkuk, 250 km northeast of Baghdad.

The article also calls for conducting a census to be followed by a referendum to let the inhabitants decide whether they would like Kirkuk to be annexed to the autonomous Iraqi Kurdistan region or having it as an independent province.

These stages were supposed to end on December 31, 2007, a deadline that was later extended to six months.

The former regime of Iraqi President Saddam Hussein had forced over 250,000 Kurdish residents to give up their homes to Arabs in the 1970s, to "Arabize" the city and the region's oil industry.

Aswat Aliraq

Oil Prices Soar to New Record High Near $128 a Barrel

The price of crude oil soared to yet another record high Friday in trading on the New York market.

The price of a barrel of oil for future delivery surged about $3, and went as high as $127.82 a barrel.

The price hike follows declines in the value of the dollar, strong oil demand from China, and a prediction by experts at the Goldman Sachs investment bank that oil could rise to an average price of $141 a barrel in the second half of this year.

Worries about high prices are prompting the U.S. Energy Department to suspend purchases of oil for the U.S. strategic petroleum reserve. The action follows a congressional vote this week to stop filling the reserve until oil prices fall to $75 dollars a barrel.

The government had been buying about 76,000 barrels of oil a day to fill the reserve. President Bush had argued that the reserve is needed and the amount of purchased each day is too small to significantly boost demand and prices.

The U.S. reserve can hold 727 million barrels of oil and it is now nearly full with a bit more than 700 million barrels.

PUKmedia :: English - Home

U.S. House Leader Nancy Pelosi visits Iraq

U.S. House of Representatives Speaker Nancy Pelosi, a key Democrat critic of President George Bush's war policy in Iraq, landed in Baghdad on Saturday for talks with U.S. and Iraqi officials, the U.S. embassy said.

An embassy spokeswoman said Pelosi would meet U.S. ambassador Ryan Crocker and the commander of U.S. forces in Iraq, General David Petraeus. The California Democrat would also hold talks with senior members of Iraq's leadership, although the spokeswoman declined to give details.

Pelosi led Democratic opposition to Bush's decision in early 2007 to send 30,000 additional American soldiers to Iraq in a bid to halt Iraq's spiral into all-out civil war.

With violence down, the extra combat brigades are being withdrawn. But there will still be 140,000 U.S. troops in Iraq when the last "surge" brigade leaves in July.

PUKmedia :: English - Home

Sadr Front and government reach new pact

Al Sadr Bloc spokesman Sheikh Salah Al Ubaidi declared that the front and representatives of the government have reached a new agreement to halt military operations in Sadr City and withdraw gunmen affirming that the pact has taken effect in light of cooperation from both parties. Al Ubaidi noted that US Forces have entered the city but deployed in regions where they were stationed before the agreement. While pointing out to the deployment of US troops in southern and eastern the city, he noted that endeavors are centered on pulling out US Forces if security is ascertained.

To guarantee the implementation of the agreement, Al Ubaidi revealed that a five members delegation of the front’s leaders with the recommendation of Sayyed Moqtada Al Sadr has arrived to follow up the implementation of the agreement and the situation on the ground. One the of the members’ delegation Sheikh Mohannad Al Gharawi said after displaying the situation in the city that it needs more work and commitment calling to respect the agreement and human rights.

Sadr Front and government reach new pact | Iraq News | Alsumaria Iraqi ********* TV Network