Iraq's Odious Debts

Raising the flag on Iraq reparations

Haider Rizvi
Inter Press Service
June 23, 2005

New York: The United Nations is being urged to stop paying billions of dollars in reparations from Iraq – one of the world’s most indebted countries – to claimants, many of them from Kuwait, one of the world’s richest nations. The reparations, which are derived from Iraq’s oil revenues, relate to Saddam Hussein’s invasion of that country 15 years ago.

A UN meeting in Geneva next week will decide which claims for war reparations relating to the occupation of Kuwait in 1990-91 are to be paid by Iraq, and in what amounts.

So far, the UN Compensation Commission, a body created in 1991 as a subsidiary organ of the 15-member Security Council, has awarded compensation of more than US$52 billion to individuals and businesses who filed claims for losses during the war.

Despite the ongoing US-led occupation of Iraq, the commission has imposed another $33 billion in war reparations against that country, which are yet to be paid. The remaining claims imposed on Iraq – and those yet to be decided – are primarily related to state-owned oil companies, multinational corporations and governments.

Under pressure from the United States and other Western nations, the UN imposed tough economic sanctions against Iraq soon after the end of the invasion of Kuwait. The sanctions continued for about 13 years, until the US invaded Iraq in March 2003.

Realizing the catastrophic effects of the sanctions on the Iraqi civilian population, the UN Security Council passed a resolution in April 1994 that established the oil-for-food program to allow Iraq to purchase humanitarian goods in return for its oil.

Under the program, the UN set aside about 25% of Iraq’s oil revenues toward war reparations. However, these payments did not cease with the end of the oil-for-food program itself. When the Security Council passed a resolution in May 2003 to dissolve the program, it still required that 5% of Iraq’s oil revenues be used to pay reparations.

Those critical of the UN compensation program are now calling for the world body to impose an immediate moratorium on all war payments against Iraq, while demanding measures to eliminate “odious debts” incurred by Saddam’s regime.

“At what point will the Iraqi people no longer be penalized for the unjust act[s] of the Saddam regime?” asked Jubilee Iraq, a Britain-based charity. It noted that in 1979 when Saddam seized power, Iraq not only had no long-term debt, but also held $36 billion in cash reserves.

However, by the eve of the US invasion, Iraq owed about $125 billion to foreign creditors, including $42 billion to the so-called Paris Club of rich nations. Last November the Paris Club agreed to reduce its claims by 80%, but not without imposing a number of conditions. Only 30% of the debt forgiveness came with no strings attached.

Another 30% will only materialize after Iraq agrees to implement significant structural changes to its economy. The International Monetary Fund (IMF) has made it clear that in the next three years Iraq must demonstrate its compliance with the conditions attached to the final 20% reduction.

As for Iraq’s remaining $83 billion of debt, more than $67 billion is claimed by countries that are not part of the Paris Club, and $15 billion is owed to private creditors.

In response to the Paris Club’s meeting last year, the interim Iraqi leadership described most of the debt as “odious”, and demanded that it must be reduced by 95%, in addition to an end to war reparations.

This week, both the European Union and the United States are hosting a meeting in Brussels to discuss Iraq’s debt. The meeting is expected to draw foreign ministers from 80 nations, including US Secretary of State Condoleezza Rice and UN Secretary General Kofi Annan.

For their part, in order to build pressure on the Compensation Commission, a number of activists from the US, Britain, Iraq and other countries are on their way to Geneva. Some of them have already started fasting outside the UN offices there to draw attention to their protests.

“Taking Iraqi oil revenue and paying companies in Kuwait is an injustice,” said Kathy Kelly of Voices in the Wilderness. “The people of Iraq have already suffered so much, from sanctions to bombardment to occupation.”

“The commission has no legitimacy for one day longer,” Hans von Sponeck, who quit as UN humanitarian coordinator in 2000, said while joining protesters in Geneva last week. “It is not a colonial master.”

The commission will begin its three-day meetings next Tuesday.

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