Iraq's Odious Debts

Iraq must have a leadership Iraqis can respect

Bathsheba Crocker
The Financial Times
June 15, 2004

The unanimous passage of a new United Nations Security Council resolution on Iraq last week, together with the appointment of an interim Iraqi government on June 1, provides some long overdue clarity about what will happen on June 30. Until a few weeks ago, it looked as if the guarantee by George W. Bush and Tony Blair that Iraq would have “full sovereignty” was just rhetoric. But, five draft resolutions later, Security Council members and Iraq’s new leaders managed to walk the US and Britain back from severely limiting that sovereignty.

Security Council members acted constructively to start Iraq’s new government on the right foot and the US and UK wisely recognised the need for flexibility on their original demands. Yet the Council’s deliberations about what sovereignty should mean have been disconnected from those who will determine whether Iraq’s political transition succeeds: the Iraqis themselves.

What ultimately matters is whether the resolution gives the interim government the authority it needs to gain Iraqis’ approval. The new resolution is vague on the government’s powers, portending continued confusion. In the end, how the new Iraqi government, the UN and the US handle issues of security, resources and a governing legal framework will be critical.

Iraq after June 30 will fail the most basic test of sovereignty: it will not hold a monopoly over the use of force within its borders. The UN resolution says the multinational forces in Iraq will be authorised to use “all necessary measures” to maintain security in Iraq, under US command and control.

After June 30, there will be tensions between the new Iraqi government and US military commanders. Bowing to pressure from other Security Council members, the US agreed to include a reference in the new resolution to an Iraq-US exchange of letters that spells out the planned relationship. But those letters insist only on ensuring co-ordination, without delineating how disagreements will be handled. Given the continuing violence, ambiguity could prove dangerous. It could also undermine the new government’s authority.

Another measure of sovereignty is Iraqi control over resources. Under the May 2003 UN resolution, the Coalition Provisional Authority has controlled how Iraq’s oil revenues are spent. The new resolution gives Iraq’s interim leaders control over how those revenues are spent, which should alleviate concerns that the new US embassy will merely be a continuation of the occupation. But the UN Security Council has nonetheless mandated where Iraq’s oil proceeds must be deposited, as well as insisting on continued international oversight. The resolution is also silent on Iraqi input into how US reconstruction funds – Iraq’s largest source of revenue – will be spent.

Moreover, the new resolution will continue the arrangement established last year whereby 5 per cent of Iraq’s oil revenues are set aside to pay Gulf War reparations. Added to Iraq’s $120bn debt overhang, those reparations take a massive bite out of the money available to Iraq. The resolution encourages substantial debt reduction, but the issue fell flat at last week’s meeting of the Group of Eight.

Finally, the resolution does not address the legal framework for the interim authority. Contentious issues abound, such as the validity, after the end of the month, of CPA edicts that allow foreign investment in Iraq and shield US personnel (including contractors) from legal liability in Iraq. To stave off controversy about Iraq’s interim constitution, the US and Britain decided not to mention it in the resolution, which has already caused problems for the Kurds. Yet the resolution endorses the constitution’s timetable for elections and reverses its security arrangements. By incorporating only some of the constitution’s provisions, the resolution increases confusion about the continued application of the rest of that law.

The credibility of the handover is critical to putting Iraq on the right track. With Security Council agreement, the door is open for pragmatic and creative improvisation on the ground between the new Iraqi government, the US and the UN. There is a huge burden on all sides to turn round the legacy of the US occupation and give the new government authority and legitimacy. Ultimately, the calibre of decisions made will determine whether the Iraqis give their new government a real chance.

The writer, a former US State Department attorney, co-directs the Post-Conflict Reconstruction Project at the Center for Strategic and International Studies in Washington.

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