Tatiana Kamoza
Novoe Vremya, Russia
May 15, 2003

MOSCOW — The “big troika” consisting of the leaders of Russia, Germany, and France–scathingly called the “three no’s”–hadn’t even left St. Petersburg before a startling proposal came from the United States. Deputy Defense Secretary Paul Wolfowitz suggested that these three countries forgive the Iraqi people the debts incurred by Saddam Hussein’s regime. This is an opportunity to help a nation that has suffered from the tyrannical rule of a dictator and the current military operation and to join in the reconstruction of Iraq following victory.

Since Russia, Germany, and France did not want to finance the war, it would be logical to help build peace. Any policy must be paid for. The United States has spent tens of millions of dollars on the military operation. The time has come for those who remained observers to pay out some money. The proposal made by Paul Wolfowitz is a natural reply to the “big troika’s” demand that the postwar reconstruction of Iraq be handled by the United Nations. Incidentally, this demand could also be taken as mockery: You may win a victory, but don’t even think of reaping the benefits.

Russia and, incidentally, its allies have found themselves in an awkward situation. For the sake of maintaining their reputation they should cancel Iraq’s debts and show the world, not only the United States, that they are genuinely concerned about the fate of the Iraqi people. But according to various estimates, Iraq’s debt to Russia runs from $8 billion to $14 billion. To a large extent these debts and the interests of Russian companies in Iraqi oil and gas projects explain the anti-war stance taken by Moscow. Saddam Hussein always admitted the existence of the Iraqi state debt to the Soviet Union and then to Russia, while the new leaders of Iraq may renounce it.

The Paris Club, a traditional venue for settling debt disputes in the international community, may also refuse to acknowledge Iraq’s debts to Russia–mainly because many of them are state debts of the Saddam administration for the delivery of Soviet and then Russian armaments. The Paris Club will never confirm such debts and will not demand their repayment.

It appears that Russia has lost these billions. But by renouncing Iraq’s debts it could substantially improve its political image and the present cool relations with the victor. In this case, Washington is likely to invite Russia to also take part in the peaceful reconstruction of Iraq–in last place, naturally, after the United States, its allies, and those prudent members of the international community that adopted a neutral stance in the war.

However, Russia may choose confrontation: decline the U.S. proposal, demand a return of the debts while settling Iraqi affairs under the aegis of the UN, and so on. What is important is that Moscow will be able to demonstrate that the will of the U.S. hawks wields no authority in Russia.

Such an opinion has already been voiced. Some politicians are advising Moscow to bargain, saying that no one has written off the Soviet debts, so we should not cancel the debts of others. Let others forgive our debts and then Russia will write off the billions owed to it by Iraq. A different outcome would be very painful to us–painful, indeed, because Russia would lose an enormous amount of money.

It would be even more painful to create such a precedent. The scope of military and economic presence of the former USSR is rather large. According to rough estimates by experts, the countries in this area, apart from Iraq, owe present-day Russia $25 billion to $30 billion. It is a formidable sum indeed.

All this raises the problem of making a choice far more essential for Russia than the rather simple problem of the Iraqi debts. If Moscow demands the repayment of the debts, it will certainly win in the short-term economic perspective but will lose in the long-term political perspective. By yielding to a perceived need to stand its ground, Russia will find its services are not required, not only in postwar Iraq but also in other regions for many years to come. In this case, its economic losses will increase and what is more, by far larger sums than its total outstanding debts.

It should be understood that the beginning of a war is a matter of principle and the end of it is a compromise. Failure to understand this simple truth forces any state to pay heavily, and repayment of the debts will be out of the question.