Carol Giacomo
Forbes.com
December 4, 2003

Washington: A senior French official said on Thursday that he does not see an easy way to quickly reduce some of Iraq’s huge $200 billion in outstanding debt because the U.S.-occupied land is not a sovereign country.

While many parties, including the United States, have called for forgiving Iraqi debt to give reconstruction a boost, the plan has also been caught up in politics surrounding the U.S.-led invasion of Iraq earlier this year.

The French official, Foreign Ministry spokesman Herve Ladsous, said members of the U.S.-appointed Iraqi Governing Council may visit Paris in mid-December and that the issue of debt forgiveness would be discussed.

Ladsous, at a breakfast meeting with reporters, said the Paris Club of creditor nations that works out debt payment and forgiveness issues with indebted states has “never signed a rescheduling deal with an entity that was not an independent and sovereign state.”

“For the time being, I cannot see a solution on this, which is an issue of principle,” he said.

For the Paris Club to be able to act to forgive or reduce Iraq’s staggering financial obligations, it would require some kind of “formal” action on Iraqi sovereignty, he said.

“To our mind, ideally, that would have been recognition (of Iraq) by the international community through a (United Nations) Security Council resolution, and I cannot see anything very short of that,” he said.

Ladsous reaffirmed that “when the time comes” and a debt rescheduling can be considered, France, Iraq’s third largest creditor, “will be ready to be very generous.”

With $200 billion in obligations threatening to undermine Iraq’s chance’s of economic recovery, the U.S.-installed government in Baghdad is making international efforts to reduce that debt.

A senior Iraqi delegation will meet World Bank and International Monetary Fund officials in Jordan next week to discuss a mechanism for reducing an estimated $100-$120 billion of debt, excluding around $100 billion in war reparations.

Ladsous said a mid-December visit to Paris by a governing council delegation is also under serious consideration.

Besides the United States, the World Bank and the Group of Seven wealthy nations have also called for a reduction in Iraq’s debt load.

But the issue has become politicized, providing a means for countries like Germany and France, which opposed the U.S.-led war to oust Saddam Hussein, a way to try and influence the reconstruction and political future of Iraq.

The United States recently put forward a revised plan that would turn over power to an Iraqi government next year without direct elections. But it has run into opposition from Iraq’s leading Shiite cleric.

The U.S. plan “goes in the right direction but not fast enough,” Ladsous said, although he acknowledged that “we all realize that elections . . . will take some time” to organize.

Perhaps enlarging the existing governing council with more members representing other politcal groups would enhance the government’s legitimacy and “do the trick,” he said.

In an apparent reflection of continued U.S.-French tensions over Iraq, the United States so far has not taken Paris up on its offer to help train Iraq’s new police force, even though it has had trouble enlisting other countries to help out.

“For the time being, it’s not being officially and seriously discussed,” French Ambassador to the United States Jean-David Levitte said.

Reuters News Service