Iraq's Odious Debts

Jubilee Iraq Press Release: Condemnation of James Baker’s double dealing on Iraq

October 13, 2004
Naomi Kline revealed today that James Baker has serious conflicts as regards Saddam’s debt. Jubilee Iraq has been critical of Baker’s involvement in this issue since his appointment last December. The latest revelations are particularly shocking, but are in harmony with the odious nature of the original loans to Saddam.

Justin Alexander, Coordinator of Jubilee Iraq says:

“The Carlyle Group was acting against the interests of the Iraqi people
and justice by seeking to enforce reparation payments to Kuwait. To
profit from the Iraqi people’s suffering is bad enough, for this to be
done by a company in which a leading partner and shareholder is
supposedly tasked with the job of canceling that debt add a grave
conflict of interest to this crime.

“The story of Saddam’s debt is rotten to the core. The original loans
financed the horrific Iran-Iraq war and the Al-Anfal genocide of the

When James Baker visited Iraq in 1989 as Secretary of State he promised
Tariq Aziz additional US loans in spite of the horrific gassing of
Kurds at Halabja and other atrocities. The odious nature of the debt
means that, at the very least, it must be written of immediately and
unconditionally. Many Iraqis go further and demand that the countries
that financed Saddam pay them reparations. If justice and not power
prevailed in international affairs then Saddam’s creditors would be
paying the reparations to Kuwait as well as far greater reparations to
the Iraqi people.”

Jubilee Iraq is a network of Iraqis and internationals, with supporters
ranging from Sinan Al-Shabibi, the Governor of Iraq’s central bank to
Archbishop Desmond Tutu of South Africa. Jubilee
Iraq’s Iraq Director is currently consulting with Iraq’s leading
religious and political figures, expect dramatic developments on this

A summary of the scandal, with links:

Today Naomi Klein reveals shocking information about James Baker’s attempt to double-cross Iraq (a short version appears in the Guardian, a longer version in the Nation and leaked documents. here is an arabic summary [PDFver here] ).

Baker, appointed Bush’s Special Envoy on Saddam’s debt last December,
is also a senior counsellor and an equity partner with the Carlyle
Group, an investment bank and defence contractor in which he has a
reported $180 million stake.

The Carlyle Group is part of a consortium secretly proposing to try to
collect $27 billion of debt on behalf of Kuwait. On July 16, 2003 the
consortium met with Kuwait officals and agreed to “prepare a detailed
financial proposal for the protection and monetization” of reparation
debts from Iraq.

The Proposal to Assist the Government of Kuwait in Protecting and
Realising Claims Against Iraq was hand-delivered to Kuwait foreign
minister, Mohammad Sabah al-Salem al-Sabah, on January 21 2004. Baker
was meeting the same man that very day as Bush’s envoy with the stated
goal of asking them to forgive Iraq’s debts.

The main proposal would transfer ownership of $57 billion in Saddam’s
unpaid debts and reparations. The debts would be assigned to a
foundation created and controlled by a consortium in which the key
players are the Carlyle Group, the Albright Group (headed by another
former secretary of state, Madeleine Albright) and several other
well-connected firms. Under the deal, Kuwait would also give the
consortium $2 billion to invest in a private equity fund devised by the
consortium, with half of that going to Carlyle. The consortium would
then use its personal connections to persuade world leaders that Iraq
must “maximize” its reparation payments to Kuwait. The more the
consortium gets Iraq to pay over a period, the more Kuwait collects,
with the consortium taking a 5% commission or more. If Kuwait accepts
the consortium’s offer, it states, “we will distinguish Kuwait’s claims, legally and morally, from the sovereign debt for which the United
States is now seeking forgiveness.”

The Proposal notes Baker’s role as debt envoy will initially limit his
role, but continues: “We believe that with Secretary Baker’s retirement
from his temporary position [as debt envoy], Carlyle and those leading
individuals associated with Carlyle will then once again be free to
play a more decisive role.”

In a letter dated August 6 2004, the consortium informs Kuwait’s
foreign ministry that the country’s unpaid debts from Iraq “are in
imminent jeopardy”. World opinion is turning in favor of debt
forgiveness, another letter warns. The consortium’s proposal spells out
the threat: not only is Kuwait unlikely to see any of its $30bn from
Iraq in sovereign debt, but the $27 billion in war reparations that
Iraq owes to Kuwait from Saddam Hussein’s 1990 invasion “may well be a
casualty of this US [debt relief] effort.” In the face of this threat,
the consortium offers its services. Its roster of former high-level US
and European politicians have “personal rapport with the stakeholders
in the anticipated negotiations” and are able to “reach key
decision-makers in the UN and in key capitals”.

Kathleen Clark, a leading expert on government ethics and regulations,
said this meant that Baker was in a “classic conflict of interest.”
“Baker is on two sides of this transaction: he is supposed to be
representing the interests of the US, but he is also a senior
counsellor at Carlyle, and Carlyle wants to get paid to help Kuwait
recover its debts from Iraq. Carlyle and the other companies are
exploiting Baker’s current position to try to land a deal with Kuwait
that would undermine the interests of the US government.”

Jerome Levinson, an expert on political and corporate ethics, said:
“[This is] influence peddling of the crassest kind. The consortium is
saying to the Kuwaiti government, ‘Through us you have the only chance
to realize a substantial part of the debt. Why? Because of who we are
and who we know’.”

For more information, CONTACT:
Justin Alexander, +44 7813 137171

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