When Saddam Hussein’s statue fell in the centre of Baghdad, one might be forgiven for feeling a little of the coalition’s triumphalism in a liberated Iraq. However, as the country rejoins the ‘international community’, it has become clear that the spectre of Saddam will be with Iraq for sometime yet One way in which Saddam looms large is in the form of the billions of dollars Iraq owes in debt and reparations claims.
Determining the exact levels of Saddam’s debts is contentious. The best estimate is probably the CSIS estimate of $383 billion: $127 billion in loans, $199 billion in reparations and $57 billion in contractual obligations. Of this some $4 billion is owed to France, much of it to pay for F1 fighters and Exocet air-to-surface missiles, and $9 billion is owed to Russia, money used to buy MIG fighters and helicopters. Even if this figure were a massive overestimate, Iraq would still be in the World Bank’s most burdened category for highly indebted poor countries.
At present Iraq, with the second biggest oil reserves in the region, is only able to pump about $10 billion of oil a year, just 2% of the money owed. The Iraqi people, having been impoverished by war, then war, then sanctions, then war again, can hardly be expected to pay the $15,000 they would each owe if they were made to foot the bill incurred building palaces and buying guns. Thankfully, moves are being made to restructure, if not cancel, Iraq’s debt.
Jay Garner, the man whom the US intends to direct the restructuring effort, has urged governments to forgive Iraq’s debt, and the British government has agreed to forgive some but not all, of the £1 billion debts owed to the UK by Iraq. Jon Snow, the US Treasury Secretary, has spoken powerfully on the issue, saying ‘certainly the people of Iraq should not be saddled with those debts incurred through the regime of the dictator who has now gone.’
The US government, who have based the rhetoric they used to justify the war in Iraq on the country being free of Saddam’s oppression, have a great vested interest in wiping the debt. Furthermore, for oil to begin flowing again, and American companies to start working in Iraq, there may have to be new legal safeguards in place to protect the crude from creditors. That said, the German, French and Russian governments, those who have been most opposed to the war on humanitarian grounds, have also been most hostile to the issue of writing off the debt.
The organisation ‘Jubilee Iraq’ has been campaigning for the cancellation of the debt. Building up a broad coalition of groups, they have been arguing that ‘unless the Iraqi people are freed from Saddam’s debts, they will never be able to rebuild their lives.’ Cancellation could be done through a formal Paris Club meeting, or through the International Monetary Fund.
The debt crisis in Iraq also brings up a larger issue. If Saddam’s debts are cancelled, this may set a precedent for odious debt. Dictators support their regime through loans, and thus far the international community has not been too concerned with the legitimacy of regimes to which it loans money. If Iraqi debts were cancelled, this would hopefully usher in an era in international finance where companies and governments could no longer be ruled simply by the profit motive, but would have to consider the legitimacy of the government to which they were lending.
Jubilee Iraq Campaign: www.jubileeiraq.org