The 80% cancellation of Iraq's debt to the nations of the Paris Club was a considerable victory for Washington, according to Le Monde (Paris)....

[Translated from Le Monde (Paris)]


By Babette Stern

** The political accord sought by Washington ends the year-long quarrel between the United States and Europe. From Santiago, Chile, where they were participating in the Asia-Pacific Forum, Presidents Bush and Putin followed the evolution of the negotiation. **

Le Monde (Paris)
November 23, 2004
Page 5

The political instructions were clear: do everything to reach a consensus on Iraqi debt before the opening of the Sharm el-Sheikh summit on Monday, Nov. 22. On Sunday, Nov. 21, after five days of negotiations in the presence of -- for the first time -- an Iraqi delegation, the 19 members of the Paris Club (which brings together public creditors) reached an agreement: "overall relief from 80% of external public debt in three phases," announced Jean-Claude Jouyet, president of the Paris Club.

The accord foresees canceling immediately part of the late interest (70%), equal to a reduction of 30% of the debt. This concession was made by Paris to take into account the economic impact of the sanctions regime to which Iraq was subject for more than ten years.

A second phase of 30% ($11.6 billion) will be accorded when an agreement is signed with the IMF, probably in the course of 2005. Since the end of September, Iraq is already "under contract" to the international institution, which has freed up emergency aid amounting to $436 million.


The so-called "post-conflict" program, to be obtained after Baghdad has paid back the remainder of the $81 million owed to the IMF, is the simplest formula among the institution's programs. Its principal virtue was to permit get negotiations going again within the Paris Club. The third phase of the accord -- supplementary renunciation of 20% ($7.8 billion) -- will depend on Iraq's economic situation at the end of the IMF program, in 2008.

Since the question of how to handle the Iraqi debt arose a year ago, negotiators have been divided into two camps. On one side, those who, led by the United States, think that the debts contracted by Saddam Hussein should be cancelled in order to help the country's economy get going again. The others, including France and Germany, point out that Iraq is not a poor country, since it possesses the second largest petroleum reserves in the world, and that it would not be "fitting," to use Jacques Chirac's term, to grant to it treatment that is much more advantageous than that accorded to the poorest countries.

On Sunday, the two camps found some common ground under high surveillance from the Élysée [the residence of the president of the French Republic] and the White House. The American administration insisted for months on a 95% cancellation, at once. It can find grounds for claiming victory in the 80% cancellation it got from the Paris Club. From Santiago, Chile, where he was participating in the Asia-Pacific Forum, President George Bush hailed the accord reached as "a major international contribution to the political and economic reconstruction of Iraq."

Paris and Berlin, till then straining to hold firm at 50%, are offering proofs of generosity by "pushing" all the way to 60%, "a level that is lower to the one granted to ex-Yugoslavia," emphasized one negotiator, pleased that the "phased" approach defended by France had been adopted. "The second phase will come after the elections, so we'll know who we're dealing with," he confided.

As for the third, Paris hopes that in 2008, after three years of iron discipline imposed by the International Monetary Fund, Iraq will be capable of facing up to its international obligations. "If the rosy scenario comes true, Iraq will at that point be able to tap its oil revenues, says a high-level official. The debt contracted owed to the Paris Club constitutes only one third of Baghdad's financial obligations. Some $80 billion remain to be paid back to private or public lenders, including about $30 billion to Saudi Arabia. The American secretary of the Treasury, John Snow, noted the rule of "comparable treatment" that imposes a similar reduction vis-à-vis its other creditors.

The Iraqi minister of finance, Adel Abdel Mahdi, meanwhile, called the accord a "very important step from Iraq" and said that "the money will be spent on reconstruction." Mr. Mahdi has never hidden the connection that might exist between the lenders' generosity and the award of contracts. France, Germany, and Russia certainly had this in mind at the moment of signing.



The principal of Iraq's debt to the 19 nations represented in the Paris Club amounts to $21.6 billion.

Japan is the largest creditor with $4.108 billion. It is followed by Russia ($3.450 billion), France ($2.993 billion), Germany ($2.403 billion), the United States ($2.192 billion), and Italy ($1.7 billion), the other countries representing only a few hundred million dollars each.

The G7 holds, all by itself, almost $15 billion.

The back interest swells the burden of the sums owed to the Paris Club to $38.9 billion.

This total only represents one third of the total Iraqi external debt, estimated by the IMF at $120 billion. The rest was borrowed from the ex-republics of the Soviet Union and the oil kingdoms of the Gulf.

The largest portion is held by Saudi Arabia.

Translated by Mark K. Jensen
Associate Professor of French
Department of Languages and Literatures
Pacific Lutheran University
Tacoma, Washington 98447-0003
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