The war over the recovery of Iraq's staggering foreign debts and liabilities -- amounting to as much as US$383 billion -- is yet to begin.
Creditors and claimants will be the losers, analysts say.
With a total annual economic output of perhaps US$25 billion, no new Iraqi government could survive such a crushing burden and a massive debt restructuring is certain.
Rick Barton, director of the Iraq post-conflict reconstruction project at the Center for Strategic and International Studies, a Washington think-tank, said the liabilities broke down as follows:
? US$199 billion in Gulf War compensation claims. Of this, US$172 billion is for companies, governments and institutions. The rest is money still owed to families and individuals.
? US$127 billion in debt, of which US$47 billion was accrued interest.
? US$57 billion owed for pending contracts, such as energy and telecommunications deals. Most of this is owed to Russia.
"It is going to take some tough bargaining. Once Saddam has gone, everybody is going to be fighting for the money even though they were never going to get it in the first place," Barton said.
A likely deal might mean shutting down most of the Gulf War compensation claims, telling big claimants such as Kuwait and Saudi Arabia to give up and accept Saddam's removal as the best compensation, he said.
Remaining family claims, now costing Iraq US$4 billion a year, might be put on hold for five years until the economy picks up.
"This is an interesting point on US policy because, of course, the US has been pushing for these claims to be paid," Barton said. But the survival of Iraq was now the priority.
The debt, removing the accrued interest, would be US$80 billion, of which about US$30 billion is due to Gulf States, US$17 billion to Kuwait and US$12 billion to Russia.
"Like a typical bankrutpcy, it is probably worth a penny to two pennies on the dollar," he said.
Pending contract payments could be passed up, Barton added.
Michael Mussa, former chief economist at the International Monetary Fund and scholar at the Institute for International Economics, said the debt was expected to be written down substantially.
"You need to have a new Iraqi government in place that is capable of negotiating its side of that issue. It is not something that is going to be settled by an interim military administration or an interim UN-backed administration," he said.
Mussa agreed that Iraq, even with potential oil exports worth US$25 billion a year, could not meet its debts.
Any restructuring agreement may vary from debt instrument to instrument, he said.
"So debt on old weapons purchases is probably not going to be honored very much whereas debt for civilian services that were provided, building hospitals and so forth, may be in a different category."
Barton, however, pressed for a quicker solution, preferably wiping out all of the Iraqi debts and obligations, with the struggle starting as soon as IMF-World Bank meetings here this weekend.
"At the first opportunity, with the World Bank meetings this weekend, donors conference, or whatever, just say: `Look, the best thing we can do for these people is to disencumber their money as opposed to pretending we are going to pull some of our own out of our pockets,'" he said.
The best solution would leave Iraq with no debts or obligations, he said.
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