Lisa Peryman
Odious Debts Online
June 11, 2004

Religious leaders called on the Group of Eight (G8) industrial nations at their meeting this week to cancel all multilateral debts owed by heavily indebted poor countries (HIPC), fueling speculation that G8 leaders might forgive a majority of Iraq’s $120 billion debt.

Debt campaigner Jubilee USA issued a letter signed by more than 250 religious leaders urging the G8 nations to cancel 100 percent of the debts owed by impoverished nations to multilateral development banks “without imposing harmful conditions.”

“As you discuss the importance of cancelling the odious debt of Iraq, we call on you to go farther than initial stabs at debt relief and provide full debt cancellation, not only for Iraq but also for all nations ensnared by odious debts throughout Africa, Asia and Latin America,” said the letter, dated June 8 and delivered to the G8 summit this week at Sea Island, Georgia.

News reports prior to the meeting suggested the Bush administration would push fellow G8 members for a dramatic reduction of Iraq’s debt. A position supported by a report prepared by the International Monetary Fund for creditors urging substantial debt relief to help mend Iraq’s war-battered economy.

However, no consensus was reached on the amount of debt to be forgiven. Instead, the details are expected to be worked out within the framework of the Paris Club group of creditors.

Speaking at Sea Island, Russian President Vladimir Putin said, “We are members of the Paris Club, we were ready to take some losses when we entered the club, that is why the issue [of the Iraqi debt] should be addressed with the club.”

Earlier this year, Russia’s Finance Minister Alexei Kudrin said Paris Club requirements state that creditor countries should write off around 65 percent of the debt owed to them by Iraq. According to an anonymous Russian source, Putin told President Bush, “Our flexibility will depend on yours and the capacity of our businesses to work in Iraq.”

French President Jacques Chirac made his position clear at a final news conference on Thursday.

“A cancellation? Yes. Substantial? Yes. What does substantial mean? For us, it means about 50 percent, I do not want, we do not want to go further.”

Chirac said Iraq’s potential oil wealth would make forgiving more of the Iraqi debt difficult to explain to other poor debtor countries.

“How would you explain to heavily indebted poor countries or other heavily indebted countries like Nigeria that in three months we are going to [do] more for Iraq than we have done in 10 years for 37 heavily indebted poor countries?” he said. “It makes no sense. It is not decent.”

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

“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,” said Schroeder. “One has realized now that you can win a war alone but that doesn’t mean you can organize postwar matters alone.”