[stop-imf] Creditors can dump 80% of Iraq debt, minister says - Paris Club deal info

[robert weissman]

Date: =09Sat, 20 Nov 2004 13:16:36 -0000
From: =09Justin Alexander (Jubilee Iraq) <news@jubileeiraq.org>
To: =09<jubileeiraq@simplelists.com>



_Newsfla__sh___



The Paris Club cartel of creditors has been meeting this week, and news
has just filtered out (11am GMT) that a deal has been achieved.
Germany's finance minister Hans Eichel told reporters: ''I had talks
with my American colleague, John Snow, which created the basis on which
the forgiveness of Iraqi debt can be settled mutually in the Paris Club.
We agreed that there should be a write-off of debts in several stages
amounting to *80% in total."* 30% would be written off immediately,
another 30% in a second stage *''tied to a program of the International
Monetary Fund*'' and a further 20% ''linked to the success of this
program.* *Within this framework, the necessary decisions can now be
taken in the Paris Club.'' He added: "by doing this we see a special
situation for Iraq. This does not create a precedent for any other
case.'' A G20 source said that debt relief would be phased *over an 8
year period*.


MEDIA: contact Jubilee Iraq coordinators: Justin Alexander in London on
+44 7813 137171 or Zaid Al Ali in Paris on +33 623152633, or email
media@jubileeiraq.org <mailto:media@jubileeiraq.org>

_Analysis_

Assuming all non-Paris Club creditors agree to the 80% reduction, which
is far from certain, *Iraq** would still be **sh**ackled with over $25bn
of debt*, not to mention new loans being peddled by the IMF and World
Bank, and the $31bn reparations awarded so far. The IMF conditions
<http://www.jubileeiraq.org/blog/2004_11.html#000659> =96 such as
privatisation and ending food rations =96 could further exacerbate the
poverty and instability in Iraq.

_Response_

Jubilee Iraq staged a protest at the Paris Club on Wednesday and met
with the Paris Club President and French officials to communicate Iraqi
views that almost all of the debt is odious, and should be written off
entirely, immediately and unconditionally - not partially, over 8 years
and based on dangerous IMF conditions. The attached sheet includes some
key quotes from Iraqis and supporters from the international financial &
political worlds. *While the offer the **Paris** Club has made is better
than nothing, it is unjust in the face of the odious origins of the debt
and economically inadequate in the face of the devastated state of
**Iraq** today.*

There will be significant developments in the next few days, so please
watch www.jubileeiraq.org <http://www.jubileeiraq.org/> for updates

To unsubscribe from this list go here:
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------------


 From 50 Years is Enough:

The German and U.S. governments have reached an agreement on how much of
Iraq's debt should be canceled: 80%. Campaigners like Jubilee Iraq have
been pushing for it to be written off completely on the grounds of
odiousness (loans taken without the consent of the people and which did
not benefit the people).
The 80% figure was a predictable compromise point, since the French &
Germans had been saying 50% and the U.S. had been saying 95%.  The
French have not yet agreed, but are expected to do so soon. The
questions now are: 1) will the U.S. see this as the conclusion of its
campaign to write off Iraqi debt, or will it push in different ways?; 2)
how will this deal affect the U.S. position on 100% multilateral debt
cancellation -- a proposal it made for the October G7 Finance Ministers
meeting, presumably as part of a deal to get French agreement on a
generous Iraq deal.  That proposal, and an alternative one from the U.K.
are expected to be taken up again in 2005. Will U.S. motivation on this
be drained?
In the article below, note that Eichel (German Finance Minister) is
careful to emphasize that this arrangement should not be seen as setting
a precedent for any other countries. Note also the bad news for the
Iraqi people -- always to be expected -- that the cancellation will
hinge on adherence to an IMF program.  There is no mention of the
payments that Saudi Arabia and Kuwait continue to collect daily as
"reparations" for the 1991 Gulf War.

Soren Ambrose - 50 Years Is Enough Network - Washington, DC  USA

=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D


Nov. 20, 2004, 10:28AM

Creditors can dump 80% of Iraq debt, minister says

By GEIR MOULSON
Associated Press


BERLIN  -- Germany's finance minister said today that he and the U.S.
Treasury Secretary have reached an agreement under which Iraq's
creditors would write off up to 80 percent of Iraq's debt, capping a
months-long U.S. push for debt forgiveness.

Finance Minister Hans Eichel said a meeting with Treasury Secretary John
Snow "created the basis on which the forgiveness of Iraqi debt can be
settled mutually in the Paris Club" of creditor nations, which is owed
about $42 billion by Iraq.

"We agreed that there should be a write-off of debts in several stages
amounting to 80 percent in total," Eichel told reporters on the
sidelines of a meeting of ministers from the Group of 20 major economies.

Thirty percent of Iraq's debt would be written off immediately, another
30 percent in a second stage "tied to a program of the International
Monetary Fund" and a further 20 percent "linked to the success of this
program," he said.

"Within this framework, the necessary decisions can now be taken in the
Paris Club," Eichel said. He did not elaborate and took no questions.

The German-U.S. agreement was being discussed today by the Paris Club
and "our expectation is that it will be accepted," said Eichel's
spokesman, Joerg Mueller.

The United States has been pushing for a generous debt write-off for
Iraq, trying to win support for wiping out as much as 95 percent of its
debt.

However, other governments, including Germany, have questioned whether a
country rich in oil should benefit from huge debt reduction. France,
which strongly opposed last year's U.S.-led war to oust Saddam Hussein,
has previously proposed that the Paris Club write off half of the debt,
postpone debt service for three years and revisit the issue when Iraq's
economy is in better condition.

Iraq has said its overall foreign debt of $122 billion is hindering
postwar reconstruction.

The Paris Club of creditor countries includes Austria, Australia,
Belgium, Britain, Canada, Denmark, Finland, France, Germany, Ireland,
Italy, Japan, the Netherlands, Norway, Russia, Spain, Sweden,
Switzerland and the United States.

Iraq also owes $80 billion to various Arab governments.

Eichel was keen to stress that the planned Iraqi debt write-off "is not
a precedent for any other case."

"We only see a special situation for Iraq," he said.




------------

 From Jubilee Iraq

Saddam=92s Odious Debt
Iraqis address the Paris Club
Since April 2003 Jubilee Iraq has been consulting with Iraqis on their
views about the debt. We have met with people from the grassroots
through to the political, tribal and religious leaders. Sunnis, Shias,
Kurds, Turkomens, Christians, Communists and Islamists, pro-US groups
and resistance fighters=85 all the different groups seem to have a similar
view on the debt:
=95=09=93The Iraqi people had no say, even regarding the civilian debts. Al=
l
the creditors knew that Saddam was an oppressive dictator =96 everyone
knew that, everyone.=94 (Waleed Al-Hilli, Al Da=92wa Party)
=95=09=93The creditors cooperation enabled Saddam to preside over atrocitie=
s
such as Halabja. Saddam never spent money for the benefit of the Iraqi
people, but just for himself and his followers.=94 (Perweez Mohammed,
Patriotic Union of Kurdistan)
=95=09 =93Iraq is not responsible for any debts which supported the regime=
=92s
war machine. It is the creditors who should be paying compensation to
Iraq.=94 (Hajim Al Hassani, Iraqi Islamic Party)
=95=09=93The vast majority is "odious" debt, used to build up the war machi=
ne
of the ousted regime, largely through arms purchases supported by the
lending countries.=94 (Interim Prime Minister, Iyad Allawi)
=95=09 =93the government will proceed from the premise that the Iraqi peopl=
e
must not bear responsibility and the consequences of the former regime's
wars and aggressive policies." (Ministerial Statement of Interim Gov.)
=95=09When Saddam executed people, he used to charge their families for the
bullets used =96 this is precisely what the creditor countries who
financed Saddam are asking of Iraqis today.=94 (Mohammed Kamil, Iraq
Prospect Organisation =96 student group)
=95=09"The creditors committed an act of oppression against the people of
Iraq by providing Saddam's regime with these funds=85There is no question
about the odious nature of these debts". (Ayatollah al-Hakim)
=95=09"We reject the idea that we should pay past due interest that was
incurred during the period Iraq was subject to UN sanctions and during
the war. We will pay the interest that was due during the period we were
not subject to sanctions.=94 (Finance Minister Adil Abdul-Mahdi) He also
says: "What we are saying is we want a cut off of 90-95%."
=95=09"Legitimate demands have to be respected, but it is unjust for Iraq t=
o
pay for the crimes of Saddam with its future.=94 (Mehdi al-Hafedh,
Planning Minister)
=95=09"The bulk of this [debt] should be declared odious and the people of
Iraq should not be required to repay it. Lenders were providing loans
not to help with economic development but to shore up a government which
had a long history of violating its citizens' human rights, compounded
by the fact that it was waging a long war with its neighbor." (Abbas
Al-Nasawi, Professor at Vermont University)
=95=09=93The debts of Iraq were incurred by a brutal authoritarian,
dictatorial regime mainly to fund all types of illicit activities, like
wars of aggression." (Ali Allawi, Interim Trade Minister)
=95=09=93It would be immoral to ask the people of Iraq to repay the money t=
hat
was lent to Saddam and was used to commit atrocities against his own
people.=94 (Ahmed Chalabi, Iraqi National Congress)
=95=09=93The Iraqi people are being oppressed by these demands for repaymen=
t
of Saddam's debts. I am with you with all my heart and soul.=94 (Ayatollah
Al Najafi)
=95=09=93Your cause is just. We support you in this case=94 (Ayatollah Ali =
Sistani)
=95=09"The dictator used these funds to build prisons, rage wars with our
neighbours and build a vast security apparatus to repress our people."
(Hamid Musa, Iraqi Communist Party)
Comments on the Paris Club and IMF
=95=09=93In the Paris Club process, the enemy is the judge, this cannot be
fair. An arbitration tribunal would be the best solution.=94 (Sheikh
Mauyad, Abu Hanifa Mosque)
=95=09 =93[We] should not accept the Paris Club to be a legitimate body for
making decisions on debt, because it merely represents the interests of
creditors=85 [but] offer creditors the opportunity of a fair and
transparent arbitration process conducted in accordance with United
Nations rules.=94 (Salih Jabr, chairman of the Economic & Financial
Committee of the National Assembly)
=95=09=93IMF conditions neglect the social consequences of economic policie=
s.
An IMF structural adjustment program would create more social tension
and which might destroy the transition to democracy.=94 (Dr. Saleh Yasir, I=
CP)
=95=09Furthermore, Iraqis feel that IMF conditionality restricts Iraqi
independence. Former Oil Minister Ibrahim Bahr Al-Uloum said he favours
IMF policies in principle but that Iraq should be allowed to choose them
freely: "We are Iraq! We were the cradle of civilization and I don=92t
want to see anyone controlling our economy by any means."

Support from the financial community for the Iraqi position:
=95=09=93The Iraqi debt problem highlights a huge unresolved flaw in the
international financial system. There is an overwhelming case, both in
terms of economic expediency and justice, for writing off most of Iraq's
debts, and doing so fast=85 It is clearly unfair to expect the Iraqi
people to pay for the reckless waste of the regime that brutally
oppressed them for so long. Currently, the financial system does not
deal with this problem sensibly. The Paris and London clubs will no
doubt belatedly negotiate some sort of rescheduling and writing down of,
respectively, Iraq's sovereign and commercial-bank debt.  But they will
almost certainly do so on the basis of what lenders judge to be Iraq's
ability to pay - which will no doubt be on the high side - not on the
rightness of its having to do so. That is not good enough.=94 (The Economis=
t)
=95=09=93The Paris Club should not be the forum for negotiations=85 this wo=
uld
compound the tragedy suffered by the Iraqi people." (David Mulford,
chairman of CSFB at time of writing)
=95=09"Even most private creditors understand the legal reasoning behind th=
e
rejection of past due interest during sanctions. It would literally have
been a crime for western banks to have handled the interest paying
transactions.=94 (John Dizard, Financial Times)
=95=09 =93Stiffing the holders of the original loans may not impede Baghdad=
=92s
ability to get new loans.=94 (Didier de Baere of East-West Debt, an
Antwerp-based debt collection firm)
=95=09=93We wouldn't blame (Iraq=92s) leaders if they decided that some of =
those
financial obligations are indeed odious. And given that this is such an
extreme case, international lenders probably wouldn't hold it against
them for long.=94 (Wall Street Journal, editorial, 30 April 2003).
=95=09"Iraq's debt stock would need to fall by about 90% to $14bn for its
interest service burden to compare with the median for sovereigns rated
B+ or lower by Fitch." (James McCormack, Fitch Ratings)
=95=09Cancelling Saddam=92s Odious debt would =93send a signal to the finan=
cial
markets that it's dangerous to deal with oppressive regimes=94
(billionaire George Soros)
=95=09=93We would expect the terms of settlement at least to reflect the
dubious status of the loans, their use for military purposes." (Alex
Garrard, UBS financial analyst)
=95=09if any nation's debts are odious, Iraq's are." (Investors=92 Business=
 Daily)

Comments by politicians and journalists:
=95=09"The [debt is the] most visible remaining symbol of international
complicity with the dictator's bloody reign. Saddam Hussein was raking
in loans and payoffs from Arab states and amassing credits from French
banks and U.S. grain export programs during his days of untelevised
atrocity.=94 (Jim Hoagland, Washington Post columnist)
=95=09"No one disputes the fact that half of the Iraqi debt to Bulgaria is
the result of arms exports.=94 (Bulgarian Defence Minister Nikolay Svinarov=
)
=95=09=93About 90% of Iraq's potential debt is war-related.=94 (Marek Belka=
,
Polish Prime Minister)
=95=09=93The Australian Wheat Board=85 effectively subsidised [Saddam=92s] =
regime.
The Australian people fed the people of Iraq while Saddam Hussein was
able to spend his money on tanks and palaces - it's a public scandal."
(Michael Danby MP, Australian Labour Party)
=95=09=93Iraq=92s outstanding loans were taken out at the behest of Baath P=
arty
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 =91=91odious''.=94 (Iraq Freedom from Debt Act, signed by 31
members of US Congress, but blocked by the US Administration)
=95=09"More weapons were needed. A problem was the low price of oil. This
hit Iraqi revenues and the pockets of previously generous allies in the
Gulf. Iraq looked increasingly to the United States and Britain, along
with Australia, the only Iraqi creditors still being paid. After a visit
to Iraq, Clement Miller, an Exim Bank credit specialist, reported that
Iraqi officials told him not to worry [about repayment] "because Saddam
Hussein himself has sent around a circular that said, very simply, 'Pay
the Americans'." (Andrew & Patrick Cockburn. The resurrection of Saddam
Hussein)
=95=09=93Iraqis should not pay for a debt accumulated by a tyrannical regim=
e,
borrowing from irresponsible creditors." (Oxfam, A Fresh Start For Iraq,
The case for debt relief)



The sources for the quotes on this sheet, along with more detailed
information, are on www.jubileeiraq.org