Bloomberg.com
June 10, 2004

German Chancellor Gerhard Schroeder said his country wants a share of Iraq reconstruction orders worth $18.4 billion in exchange for canceling parts of the Arab nation’s outstanding debt.

Schroeder, an opponent of the U.S.-led war in Iraq, assured U.S. President George W. Bush of Germany’s pledge to back substantial relief of Iraq’s $120 billion debt burden. Companies such as Siemens AG are waiting to be admitted by U.S. authorities to be allowed to bid for prime contracts.

“German industry, of course, shares an interest and we cannot accept – which isn’t expected anymore anyway – that on the one hand, one generously grants debt relief while on the other hand, one believes one could decide on rebuilding orders amongst themselves. That won’t work,” Schroeder told reporters at Sea Island, Georgia, during the Group of Eight summit. “One has realized now that you can win a war alone but that doesn’t mean you can organize postwar matters alone.”

The U.S., facing Iraq war costs of more than $100 billion and with more than 660 servicemen killed since major combat ended May 1, 2003, is seeking international help to stabilize Iraq as the Arab country’s interim government prepares to assume sovereignty on June 30.

French Rejection

Bush’s personal appeals failed to win agreement from G-8 leaders to reduce Iraq’s $120 billion of debt. French President Jacques Chirac disagreed about how much debt to cut and sought to limit relief to 50 percent because of Iraq’s revenue from oil reserves, the world’s second-largest. The stalemate leaves the Paris Club of creditor nations, whose members include both the U.S. and France, to find a compromise.

Bush wanted an agreement to write off the “vast majority” of Iraq’s debt, a U.S. official said Tuesday, speaking on condition of anonymity. The official G-8 statement included no indication on the amount of debt to be cut and said the 19-nation Paris Club of creditors, including the U.S., France and Germany, would work out details.

The G-8 summit includes the leaders of the world’s eight most industrialized nations: Canada, France, Germany, Italy, Japan, Russia, the U.K. and the U.S., which together account for more than $24 trillion, or about two-thirds of the world’s gross domestic product.

Industry Opposition

The German construction industry is “strictly opposed” to the U.S. demand for debt relief, Michael Knipper, general manager of the German construction industry association, said in Berlin. The industry’s claims, worth 1.7 billion euros ($2.1 billion), would be reduced to 340 million euros under the proposal, the lobby group said in a faxed statement.

Other Germany businesses want the work being awarded in Iraq and some have already started as subcontractors to U.S. companies.

Siemens, Germany’s No. 1 engineering company, has won a subcontract from Bechtel Group Inc., the world’s largest construction and engineering company, which has acquired Iraq rebuilding contracts worth $2.8 billion. Business will include upgrading a power plant in the northern city of Kirkuk and possibly provision of steam turbines for a power plant in Baghdad, Siemens spokeswoman Martina Kniep has said.

Past Experience

Work in Iraq may also benefit Hochtief AG, Germany’s largest builder, which owns Turner Construction Corp. in the U.S. and built the Mosul dam on the Tigris River between 1981 and 1988. The Essen- based company also built bridges in Iraq and the airport in the southern city of Basra.

Hochtief, KSB AG, the world’s third-biggest maker of pumps, and other companies with a track record in Iraq, have so far been excluded.

Germany’s BDI industry federation, representing 107,000 companies in Europe’s largest economy including DaimlerChrysler AG, said German firms would be well-placed to help upgrade the Arab country’s infrastructure because of past business ties.

“I am absolutely not worried” about Germany industry establishing a presence in Iraq, Schroeder said at a press conference in Savannah, Georgia, after the summit. “A lot will happen there.”