Iraq's Odious Debts

Next spat over Iraq: Foreign debt relief

The Asahi Shimbun
April 17, 2003

Outstanding public-sector loans to Iraq are fast becoming another contentious issue between the United States and the so-called coalition of the unwilling-a group whose prominent members include France and Russia.

Japan is also an interested player, holding a total of 673 billion yen in outstanding loans to Iraq, of which 473 billion yen is owed to the public sector. The figure does not include some interest, late-payment fees and other compensation.

Japan has the third largest amount of loans behind Kuwait and Russia. The Gulf Cooperation Council is the largest lender to Iraq at $30 billion.

Postponement of repayment of public-sector loans is expected to be discussed next week at the Paris Club, an informal organization of creditor nations. However, because the issue also involves Iraqi oil interests, no conclusion is expected until at least the Group of Eight summit in Evian, France, in June.

Iraq has a total of about 15.6 trillion yen in outstanding foreign debt.

Japan’s public-sector debt is made up of 430 billion yen in trade insurance and 43 billion yen in yen loans.

Trading companies and other firms hold about 200 billion yen in loans to Iraq.

The United States has been pushing for a reduction of existing loans to Iraq to speed up the reconstruction process, and, some say, because it does not have much in the way of loans to Baghdad, anyway.

However, Russia, Germany and France are arguing that the farthest they are willing to go is a postponement of debt repayment.

Japan is willing to go along with loan postponement, but has said it would not accept an outright reduction or elimination of existing loans.

The confrontation between Washington and Paris, Berlin and Moscow is likely to affect future negotiations on the Iraqi foreign debt question.

One Japanese trade official said, “France and Germany seem to believe offering a compromise proposal to the U.S. plan by partially forgiving outstanding debt would not be in their best interests because that might force them to go along with a U.S.-led initiative for the reconstruction of Iraq.”

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