Iraq's Odious Debts

Kuwait disputes US suggestion Iraq debt only grant

Haitham Haddadin
October 1, 2004

Kuwait: Kuwait’s foreign minister has dismissed a U.S. suggestion that Iraq may not need to repay $45 billion in debt claimed by Gulf states.

U.S. Deputy Secretary of State Richard Armitage said last week the funds were grants to help Baghdad in its 1980s war with Iran.

“That’s his own belief . . . but we consider them to be debts,” Sheikh Mohammad told reporters at Kuwait airport on Thursday upon his return from the U.N. General Assembly in New York. His remarks were carried by local newspapers on Friday.

Sheikh Mohammad said the issue should be open for discussion between creditors and Baghdad.

Kuwait agreed earlier this year to a substantial cut to a $16 billion debt Baghdad owes it but said it wants to discuss its extent with a permanent Iraq government. But Kuwait also told Washington the issue of billions of dollars of reparations sought from Iraq for its 1990 invasion are not open for talks.

On Saturday, Saudi Arabia said it was ready to discuss a major reduction to the $30 billion Baghdad owes it, but like Kuwait, it appeared to dismiss Armitage’s suggestion. Iraq owes a total of $120 billion in foreign debt.

French–Russian position

“Armitage’s demand for the countries of the world to drop Iraq’s debts is the position of the United States. On the other hand, there’s a French-Russian position not to drop the Iraq debts but to reschedule them instead,” Sheikh Mohammad said.

“Also, there are a lot of countries in the middle of the road between those two positions . . . they want . . . dropping part of the debts and rescheduling another part.”

A decision should be taken between those opposing views at a meeting between the Paris Club of 19 creditor countries and the legitimate Iraqi government to discuss international consensus pertaining to this issue, he said

“But debts remain debts,” Sheikh Mohammad said.

Referring to the funds given to Iraq by the Gulf states, Armitage told a House of Representatives subcommittee hearing: “It was provided as a grant because of the war at the time.”

The International Monetary Fund said on Wednesday Iraq’s official bilateral creditors had agreed to defer debt the country owes them until the end of 2005. The IMF, which approved $436 million in emergency aid to Iraq on Wednesday, also said the creditors indicated they are willing to do their best to provide debt relief on appropriate terms.

Iraq’s Foreign Minister Hoshiyar Zebari was quoted by Kuwaiti daily al-Rai al-Aam as saying Baghdad was sure of Kuwait’s generosity on the debts.

Asked if he raised the issue in New York with his Kuwaiti counterpart, Zebari said: “Frankly, I did not because we’re confident Kuwait’s contribution will be generous, either at the donor nations conference in Tokyo or pertaining to its commitment to what will be decided by the Paris Club.”

Of the Gulf war reparations, Sheikh Mohammad said: “This is not robbery, it’s about rights . . . There are committees and a mechanism to estimate the losses for those who have documents.”

The United Nations last week approved payment of another $376.9 million in war compensation, mostly to Kuwaitis, bringing the total approved so far to $48.9 billion.

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