The Moscow Times, Russia
May 19, 2003

DEAUVILLE, France — The top world economic powers do not expect Iraq to start any kind of debt repayments before the end of 2004 at the earliest, U.S. Treasury Secretary John Snow and European officials said Saturday.

In a development that may affect United Nations negotiations on a U.S.-proposed resolution to rapidly end sanctions on Iraq, ministers said it would take months merely to sort out how much the country owed, let alone any deal on relief or repayment.

“There was recognition that we cannot expect Iraq to make any service payments on that debt at least through the end of 2004,” Snow told reporters at a meeting of finance ministers from the Group of Seven economic powers and Russia.

A European government source, speaking on condition of anonymity, confirmed that this view was shared widely at the meeting of ministers of G-8 countries — the United States, Canada, Japan, Germany, Italy, Britain, France and Russia.

China and Russia, two of five members of the UN Security Council with veto power, have expressed major reservations about the U.S. draft resolution on ending sanctions and also said the fate of the text depended on working out the debt problem.

Russia is believed to be owed some $8 billion and is one of several countries warning against rushing into debt relief deals.

Russia will solve the problem of Iraq’s debts within the Paris Club, Finance Minister Alexei Kudrin told journalists Saturday on the sidelines of the meeting.

“We will use all instruments that are available to the Paris Club,” he was quoted by Itar-Tass as saying. “Work has successfully begun” on determining the debt Iraq’s new government will owe, and the terms for those payments, he said.

Japanese Finance Minister Masajuro Shiokawa said at the talks in Deauville he was reluctant to see debts cancelled but that a period of nonrepayment was inevitable.

German Finance Minister Hans Eichel also ruled out writing off Iraq’s debt, but said Berlin would consider rescheduling.

“There is no need for debt forgiveness,” Eichel said. Asked if he saw any room for a write off, he said: “None.”

French Finance Minister Francis Mer, who hosted the talks in the chic town on France’s northern coast, said the Paris Club of creditor countries and the International Monetary Fund would need time to work out how much Iraq owed after decades of conflict.

He stressed that experts on the Iraqi side would have to be found or appointed too as a point of contact for any meaningful discussion of foreign debts and what to do about them.

Some estimates put Iraq’s foreign debts at well over $100 billion.

There is considerable confusion over how much Iraq owes the countries in the Paris Club — a group set up in the 1950s to tackle a debt crisis in Argentina and now comprising 19 members — and equal confusion on debts to countries outside the Paris Club.

Despite the country’s small GDP relative to its G-8 peers, Russia wrote off $3.5 billion in debts to poor countries last year alone, or nearly 1 percent of the country’s GDP, Kudrin was quoted by Interfax as saying. No other G-8 country can boast such a figure, he said.

Most of that sum was written off through the Paris Club, and the remaining $700 million was written off through international initiatives, he said.

“The Paris Club meets in early June and we should know by then more clearly what the figures are, but that does not include lots of other countries,” one official said. “For now there is a lot of confusion,” the official said.

Snow acknowledged that Washington’s push for the convening of a donor conference on aid for Iraq after the war that ousted Saddam Hussein and his regime a month ago was something for later this year.

Mer and others like Eichel said likewise.

“That’s an issue for afterward,” Mer said, stressing that collecting reliable data on debt was a key prerequisite to any discussions on aid or on debt relief.

“U.S. Treasury Secretary John Snow assured me that the Iraq crisis would not hamper the development of good relations between Russia and the United States in any way,” Kudrin was quoted by Itar-Tass as saying upon his return to Moscow on Saturday evening.

“Snow is confident that close businesslike contacts between [Presidents George W. Bush and Vladimir Putin] mean there is every reason to hope for the productive development of bilateral relations in the future,” Kudrin added.

Speaking Friday, the same day as Putin’s annual address to the nation, Kudrin emphasized the need for economic growth, much as the president did. “The tasks Putin has set are dependent on taking Russia to a qualitatively new level in the world economy and strengthening Russia’s influence in the world economy,” he said, Itar-Tass reported.

Russia will fully join the G-8 in 2006, the year in which it takes the rotating chairmanship of the club, Kudrin said. And by then, the country will have become a member of both the World Trade Organization and the Organization of Economic Cooperation and Development.