Iraq seeks Arab debt forgiveness as summit opens

Reuters, Tuesday 27 Mar 2012

Baghdad asks attendees to follow the lead of UAE and Algeria in dropping its pre-invasion debts

Iraq poverty
A brick factory in the town of Nahrawan, east of Baghdad (Photo: Reuters)

Iraq asked countries at an Arab League summit on Tuesday to forgive its pre-invasion debts, urging others to follow the United Arab Emirates and Algeria which have already agreed to write off what they were owed by their fellow OPEC member.

"We've asked Saudi Arabia, Kuwait, Qatar, Libya, Jordan, Sudan, Egypt and Morocco to help Iraq in closing up its debt situation," Iraqi Finance Minister Rafie al-Esawi said on the first day of the summit, the first to take place in post-war Baghdad.

The Paris Club of 19 rich creditor nations agreed in 2004 to write off 80 per cent of some $40 billion debt to help Iraq recover from the 2003 U.S.-led invasion that ousted President Saddam Hussein but triggered years of violence and insecurity.

Debt forgiveness talks with non-Paris Club nations are still under way.

"It needs more cooperation from Arab countries regarding the cancelling of debt," Esawi said, thanking the UAE and Algeria for agreeing to cancel 100 per cent of debts.

Finance minister talks opened the three-day Arab League Summit in Baghdad, the first to be held in the Iraqi capital in two decades and the first to be hosted by a Shi'ite Arab leader, Prime Minister Nuri al-Maliki.

Tight security has locked down the capital and the government declared a five-day holiday to help ease congestion caused by checkpoints and roadblocks, with tens of thousands of extra troops drafted in.

Leaders from the 22-member group are due to meet on Thursday in talks likely to be dominated by the crisis in Syria.

IRAQ'S RETURN

Iraq's external debt was between $130 billion and $140 billion in 2003, much of which was settled through the 2004 Paris Club agreement.

That deal required Iraq to seek similar settlements with all its other creditors. But some commercial creditors won legal judgements and have refused to comply with the settlement.

Saudi Arabia last year was owed $30 billion by Iraq and Kuwait is owed around $22 billion in additional to war reparations for the 1991 Iraqi invasion of Kuwait.

Iraq's security and its oil-driven economy have improved since the bloodier days of 2006-2007 after the 2003 invasion sparked years of sectarian conflict that drove the country close to civil war.

But Iraqis still struggle with daily power shortages, unemployment and a crumbling infrastructure, despite huge oil revenues from exports of 3 million barrels a day.

Iraq hopes the summit will mark its return to the diplomatic stage in the Arab region, where many of its Sunni Arab neighbours are wary of the rise of Iraq's Shi'ite majority since the fall of Sunni dictator Saddam Hussein.

Maliki has sought a detente with Arab Gulf neighbours in an attempt to allay fears his government has moved too close to Shi'ite power Iran in a region increasingly split along sectarian lines.

Saudi Arabia recently named its first envoy to Baghdad in two decades and neighbouring Kuwait earlier this month reached a $500 million agreement with Iraq to resolve a stand-off over Gulf-war era debts. 

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