Gulf Daily News
December 18, 2003

London: Campaigners who are calling for Iraq’s debts to be recognised as “odious” yesterday denounced the process under way to reduce Iraq’s debts, saying the country would still be saddled with huge repayments.

“A Paris Club debt restructuring will ignore the odious nature of much of Saddam’s debt,” said Justin Alexander, co-ordinator for the Jubilee Iraq campaign, which has 5,000 members around the world and is affiliated to the global Jubilee movement which put debt relief on the agenda in the 1990s.

Germany and France joined with the U.S. on Tuesday during a visit by Washington’s Iraq debt envoy James Baker in saying there needed to be a substantial reduction in Iraq’s estimated $120 billion of debt.

They said it would be dealt with through the mechanism of the Paris Club, a group of 19 creditor nations which deals with debt reduction for heavily indebted nations.

The Paris Club will base its assumptions on Iraq’s ability to finance interest payments, which analysts believe could see a debt reduction of around 60 per cent, which would leave Iraq paying out around $5bn a year.

“This means Iraq will be forced to pay large amounts of odious debt, whitewashed by the language of ‘debt forgiveness,’ instead of only paying the small amount of commercial debt which a fair arbitration tribunal would judge legitimate,” Alexander said.

The doctrine of “odious debts” has been partially applied in courts and relates to debts incurred by an illegitimate regime, against the interests of its own people. That could apply to weapons purchases by Saddam Hussein and even extend to non-military loans which were not used for the interests of the Iraqi people.

Most economic analysts have dismissed the idea of Iraq’s debts being termed “odious” arguing they were incurred by an internationally recognised government, although US officials have in the past said that any debt reduction for Iraq needed to take account of the nature of Saddam’s government.

However, as well as Jubilee Iraq, campaigning bodies for developing countries like Oxfam and bankers like former US treasury under-secretary David Mulford who helped draw up the Brady plan to relieve Latin American debt, have highlighted what they see as the “odious” nature of Iraq’s debts.

From the debt campaigners to Mulford, proponents of debt forgiveness say that Iraq was being treated in a different way from other recipients of debt relief.