Not quite unforgivable

10 Jun 2004 By Edward Hadas

The main question is what price the French and Russians, who are big creditors, will extract from the US in return for granting it. The US, which desperately wants to make Iraq an economic success, will probably have to cut them in on oil contracts and the like.

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The US government has asked the G8 to discuss forgiveness of Iraqi foreign debt. The US would like to declare the debt odious, allowing for an almost total writedown. That is unlikely, since it would set a bad precedent for future regime changes. However, a debt restructuring agreement could well be reached.

French President Chirac has suggested a writedown of a "substantial amount" of the debt, rather than the "vast majority" the US has called for.

Iraq owes money for war reparations, previous borrowing and unfilled contracts. It has paid very little to foreigners since 1990.

The biggest creditors are the former regime's friends and enemies in the Middle East. Their debts, including unpaid interest, are estimated to be as high as $300bn. The governments of rich countries are owed about $25bn. Private debts are estimated to be $10$20bn, held mostly in the Middle East.

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