Steve Negus and John Reed
Financial Times
December 1, 2004

Baghdad: Iraq plans to push its Arab neighbours for a debt-relief deal at least as generous as the landmark reduction agreed by Paris Club countries earlier this month.

The country’s finance minister said on Wednesday that Iraq would push its creditors in the Middle East, led by Saudi Arabia and Kuwait, for debt reduction in excess of the 80 per cent already agreed last month by the Paris Club of creditor nations.

“We expect our Arab brothers will give us the highest reduction rate,” said Adel Abd al-Mahdi, finance minister. “Any negotiations should start with the 80 per cent rate.”

Iraq has in the past disputed whether it should pay back much of its debt to Arab countries, most of which was incurred during the Iran-Iraq war. The government of Saddam Hussein claimed that the money was financial assistance, provided by Gulf states to contain the expansion of revolutionary Iran.

Mr Mahdi, whose party has close ties with Iran, also suggested that Iraq had considered designating some of its obligations as “odious debt,” loaned for “destruction and war,” which need not be repaid.

Iraq now plans to enter bilateral talks with Arab countries on debt reduction in an effort to rebuild regional economic ties, he said.

Debts to Arab countries account for about a third of the total debt, usually estimated at about $120bn (€90bn, £63bn).