Iraq's Odious Debts

Australia to forgive Iraq debt as eyes wheat market
June 3, 2004

Canberra: Australia will forgive the majority of a $500 million debt owed by Iraq for wheat purchases as it looks to rebuild one of its most important markets for grain, Trade Minister Mark Vaile said yesterday.

Vaile said it was highly unlikely war-torn Iraq would ever be able to repay the more than $150 billion of debts it owes around the globe or its full debt to Australia that stemmed largely from wheat sales from three harvests before 1990.

But he said Australia, a leading agricultural exporter, would write off most of its debt and help rebuild the grain industry in Iraq, which imports about two million tonnes of wheat a year.

“We want to look to the future of Australia being a major supplier to one of the most important markets we trade to,” Vaile told reporters.

The government has yet to decide how much of the debt to forgive but Vaile said it would be the majority. He assured growers, however, that the government would pursue the rest.

As part of the package, Vaile said the government had also committed to contributing $A20 million ($14 million) to help build a grain storage and milling plant in Iraq, subject to its feasibility being proved.

Monopoly wheat exporter AWB Ltd said the Australian wheat industry’s position in the international wheat market would be boosted by the investment, which would provide an avenue for Australia to retain and grow the Iraqi wheat market.

But growers would be disappointed by the decision to forgive the debt, even though the decision was understandable given the situation in Iraq and might assist in the long-term development of the country and its wheat market.

“Although full recovery of the debt to growers is not possible, we have made it clear to government that they should use their best endeavours to continue to seek recovery of at least part of the debt on behalf of growers,” AWB Chairman Brendan Stewart said.

The debt relates to sales by the Australian Wheat Board between 1987 and 1990. The outstanding amount was $480.4 million, although sales were insured to a maximum of 80 per cent through government insurer EFIC, which previously paid that amount to growers. The balance owed to growers was $98 million.

Australia dominated Iraq’s wheat market during the years of Saddam Hussein, exporting up to two million tonnes of the grain a year to the country after Baghdad authorities refused to buy US wheat after the Gulf War of the early 1990s.

Australia is the world’s second-largest wheat exporter after the United States.

But since the US-led war in Iraq last year, major wheat-exporting nations have jostled to reposition themselves to supply Iraq under its new regime.

Australian grain growers welcomed the announcement to forgive most of Iraq’s debt, despite acknowledging it now unlikely they would receive the $100 million they were owed.

The Grains Council of Australia said Iraq had been an important wheat market for Australia for over 50 years.

The council’s president Keith Perrett said some growers would be disappointed over the decision to forgive Iraq’s debt but it was doubly important for Australian wheat producers that the Iraq economy recovered as it was such an important wheat market.

“Investing in processing in the wheat value chain is important markets like Iraq is an investment in future market access for Australian wheat,” Perrett said in a statement.

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