The Bush administration's plan to rebuild Iraq, including a request that more than a dozen creditor countries forgive US$127 billion of Iraqi debt, is getting little support from France, Germany and Russia, who opposed the US-led invasion that toppled former president Saddam Hussein's regime last month.
Negotiations -- covering sovereign debt owed to such nations as Russia, Poland, Egypt and Germany as well as claims from Iraq's 1990 invasion of Kuwait -- may hinder Iraq's reconstruction, according to Robert Hormats, a managing director of Goldman Sachs Group Inc and a former deputy assistant secretary of state in the Reagan administration.
PHOTO: AFP
"This will be the biggest renegotiation of financial obligations in history and probably the most rancorous," said Hormats, who also was an economic adviser in the administrations of Gerald Ford and Jimmy Carter.
"The countries that are in control have very little of the debt, so they will pressure others to give, and those nations will demand concessions," he said.
US Treasury Secretary John Snow asked for debt reduction in meetings of the G7 industrialized nations last month in Washington. While some creditors are willing to discuss debt in global forums such as the Paris Club, they haven't publicly made specific counterproposals.
Agreement to cut Iraq's debt is critical because a resumption of Iraq's oil sales at prewar levels of 2.4 million barrels a day won't be enough to finance a reconstruction that may cost as much as US$100 billion, according to Hormats.
"Not even close," Hormats said in an interview.
Iraq owes US$1.8 billion to France, US$4.3 billion to Germany and US$9 billion to Russia, according to Exotix Ltd, a London-based brokerage for emerging-country debt. These nations provided loans and credit to help Iraq develop its oil fields and wage war against Iran.
Saudi Arabia is owed US$25 billion, according to Exotix, mostly incurred when the Saudis helped Iraq finance its eight-year war with Iran.
In the marketplace for defaulted sovereign debt, money managers are showing signs of confidence that Iraq will pay some of its bills. In September, the US$11 billion of Iraqi debt that's on the market was trading at US$0.8 on the dollar.
That has risen to as much as US$0.25 in recent weeks, said Richard Segal, Exotix's research director.
The debt issue already is complicating US efforts to set terms in the UN Security Council for postwar reconstruction and administration of Iraq. The US favors a supporting role for the UN. France and Russia, which hold veto power, will only back measures giving the UN a central role in postwar Iraq, according to their ambassadors.
"They may be put out of joint if they aren't getting reconstruction contracts or access to the oil fields," investor Michael Lambert said of France and Russia. His Bermuda-based Emergent Alternative Fund has bought rights to US$6 million of defaulted loans to Iraq.
Paris-based Total SA, Europe's third-largest oil company, and OAO Lukoil, Russia's biggest oil producer, had agreements with Saddam's government for oil work once UN economic sanctions were lifted.
Conflicting and overlapping claims, coupled with the theft or destruction of Iraqi central bank records, may make it impossible to determine precisely how much Iraq owes, according to Segal.
Iraqi officials had said some funds from neighbors were grants, while the nations involved say they were loans. There are also disputes about how much accrued interest should be included.
John Taylor, the US Treasury undersecretary for international affairs, told a conference in Washington last week that Iraq won't be able to start repaying debt until at least the end of 2004.
In January, the Center for Strategic and International Studies, a Washington policy institute, said estimates of Iraq's foreign debt ranged from a US Department of Energy figure of US$62.2 billion to a World Bank estimate of US$127.7 billion. The latest CIA estimate is US$120 billion.
The strategy center estimated unpaid Gulf War claims at US$199 billion and put the sum of debt and war claims at US$326 billion. Of the unresolved claims from its 1990 invasion of Kuwait, Iraq may end up owing only about US$40 billion, according to the UN Compensation Commission, the agency processing payments.
Typically, final compensation is far less than original demands.
National Taiwan University (NTU) yesterday said it disqualified a person from an entrance examination for using AI smart glasses to cheat, along with two others for making untruthful statements in their curriculum vitae. The three applicants were given null scores, Taiwan’s highest-ranked university said, calling on prospective students to be honest in the admissions process. NTU registrar Lee Hung-sen (李宏森) said that the cheating applicant wore a hat and thick-rimmed glasses to the second written exam for medical school, claiming that they felt cold. Suspicions were aroused when the applicant stared oddly at the test for long stretches while steadily bringing the paper
A magnitude 7.8 earthquake struck off the southern coast of Mindanao in the Philippines at 7:38am today, prompting the US Tsunami Warning System to issue an alert for neighboring countries, including Taiwan. The system issued a purple alert indicating a "tsunami threat." The potential threat zone includes Taiwan, the Philippines, Papua New Guinea, Yap and Palau. Philippine authorities were assessing the damage from the quake, with the office of civil defense seeking to verifying initial reports that 15 people had been killed and 129 injured in the region, mostly from falling debris. Arlene Hollero, disaster chief of Maasim town in the Philippines' Sarangani Province,
‘GRAY ZONE’ PRESSURE: Beijing’s activities are intended to create the deceitful impression that China has jurisdiction over the area around Taiwan, the CGA said Taiwan’s rights over its territorial waters and exclusive economic zone must not be violated by any country, the Mainland Affairs Council said yesterday, adding that it will not accept any unprovoked actions. The council issued the remarks in response to the China Coast Guard conducting maritime enforcement drills near eastern Taiwan and claiming to fully exercise China’s maritime administrative law enforcement authority. The Coast Guard Administration (CGA) has been closely monitoring the situation and is taking concrete steps to defend the nation’s sovereignty and secure its waters, the council said. China has no sovereign rights over the waters off eastern
Heavy rain is expected to affect parts of Taiwan this week, the Central Weather Administration (CWA) said yesterday as a meteorologist said the active part of the annual plum rain season has started. A stationary plum rain front and southwesterly winds would bring unstable weather and abundant moisture to Taiwan from today for about a week, with the heaviest rainfall forecast for tomorrow and Wednesday, the CWA said. The agency said western and northeastern Taiwan, and mountainous areas in the east and southeast, could expect showers or thunderstorms on those two days, with localized heavy rain possible. Other parts of
RSS