Debt and Dollars in Iraq
Middle East Institute
Thursday’s BBC story entitled “Iraqi debt write-off divides G8” hovers over the heart of many inter-related problems concerning Iraq. The Group of Eight or “G8” remain unable to agree on how much of Iraq’s tens of billions of dollars in foreign debt should be written off by G8 members. Continued failure to reach agreements means that members of the Paris Club will be left to make decisions.
Proponents of debt forgiveness start with the world’s No. 1 expert Dr. Sinan Al-Shabibi, a long-time UNCTAD economic advisor and currently Governor of Iraq’s Central Bank, who recently told finance ministers at a G-7 meeting in Boca Raton, FL, in February 2004 (see remarks), that Saddam Hussein had “depleted the nation’s assets and plunged the country into a hopeless debt burden,” which must be relieved.
And of course he is right, dead right — insofar as Iraq is concerned, were it alone, in a vacuum.
Iraq’s debt cancellation, however, does not lie in a vacuum, and a neo-Conservative Bush II Administration does not call upon the likes of a Reagan Conservative like
Jim Baker to deal with Iraq’s debt unless the need is extreme — like bailing Bush II out of the 2000 election situation. Baker is the top Republican fireman: follow him to find out where the most serious political fires need to be quenched. And when someone like Baker proves unable to solve Iraq’s foreign debt problem, then it’s time to worry, indeed.
In fact, how could Baker solve this Bush II-created problem? While the US has been pushing for most debt to be written off, it has complete control over Iraqi reconstruction; European nations hold most of the debt notes yet have at best a weak shot at contracts being awarded by the US government or its primary contractors. More simply, the US has been asking Europeans to cancel billions of dollars in debt for no guaranteed reconstruction contracts. Such a background reduces American gains at the UN last week to a slight of hand. Nothing has really improved between the US and its European NATO allies, so how can anything improve in Iraq, still held by Coalition forces?
Director of Programs
Middle East Institute
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