Iraq's odious debts - a reason not to invade?

shotamoose

The Jubilee Research site reproduces a very interesting article by Lawrence Solomon on the topic of Iraq's odious debts (ie debts incurred by Saddam Hussein's dictatorial regime which should not be required to be honoured by successor governments). Solomon suggests that since Russia and France are Iraq's biggest debtors and hold lucrative oil that will trigger once sanctions are removed, they have no interest in seeing Hussein's dictatorship fall. This may well be the case, but it assumes that whoever controls post-war Iraq will be interested or able to invoke the doctrine of odious debt.

Some background on odious debt is available in Joe Hanlon's Dictators and Debt, which argues that around one-fifth of developing country debt consists of odious debt that must not be honoured if potential creditors are to be dissuaded from propping up repressive dictatorships in future. The first use of the doctrine of odious debt in the international arena was, ironically, by the USA in relation to Cuba. As Solomon writes, "the United States repudiated Cuba's Spanish debts, saying they were "imposed upon the people of Cuba without their consent and by force of arms." Furthermore, the Americans argued successfully, much of the borrowing was designed to crush attempts by the Cuban population to revolt against their domination, and was spent in a manner contrary to their interest". This has not stopped the US and others pumping violent dictators with loans ever since, often in the knowledge that the funds never went to the ordinary people of those countries but instead either straight into the accounts of dictators and their cronies or to buy weapons to oppress the very people who are to this day required to pay the loans back, interest and all. The majority of the massive debts of Brazil, Argentina, Indonesia and Nigeria consist of odious debts. If the debts sustained by Saddam are to be repudiated, then it is imperative that those incurred by Suharto, Marcos et al can be repudiated by their successors too.

All this, as I said, assumes that the new leaders of Iraq will really want to renounce the debt. This report features a fairly incomplete breakdown of Iraq's debt as at 1990 (see bottom of page), which shows debt to Russia at $5bn, debt to France at $4.7bn, to the US at $4bn, to Britain at $1.7bn, and debt to Italy at a whopping $10.8bn. It's hard to say what the situation is now - Solomon doesn't say where he gets his figures, but estimates of Iraq's current debt seem to indicate a level of about $140bn. A bit more detail from the BBC: on top of reparations claims from Kuwait and Saudi Arabia, "Iraq also owes Western governments and banks around $90bn, and has another $57bn in contractual obligations to foreign firms, especially Russian and French companies involved in oil exploration". At the moment, I'd say that unless a post-Saddam Iraq only gets to cancel the debts owed to countries who opposed a war, the argument seems somewhat spurious.

SloanerF1

Originally posted by shotamoose
At the moment, I'd say that unless a post-Saddam Iraq only gets to cancel the debts owed to countries who opposed a war, the argument seems somewhat spurious.

There is no way that this argument could justifiably be used against invasion, but if it prevents a war, why not use it? It is certainly stronger than some of those used to support an invasion...

Clintons Cat

Well the UK underwrote the money owed by sadamn to various British arms companies before Gulf War 1.
The UK taxpayer picked up the bill to the tune of nearly 1 billion pounds

The government has secretly written cheques totalling more than £33m for arms companies who supplied Saddam Hussein in the 1980s.

The files on these disastrous insurance deals have been locked up for 12 years since they were secretly authorised by Margaret Thatcher. The total loss to the taxpayer on military and civil credit sales her administration carried out with Iraq now exceeds £1bn.
....

Whitehall files show that the government guarantees were given regardless of President Saddam's brutal record and regardless of his being a normally unacceptable credit risk.

The details of these guarantees have hitherto been kept secret by claims of "commercial confidentiality". But in an unprecedented display of commitment to open government, the export credit guarantee department last week agreed to release thefiles.

Thats Just Great

Victor

The usual prodedure is that a sucessor regime is responsible for the debts of the previous regime (Russia took over the USSR's debts) and in fact this was one of the reasons used to not topple the Saddam regime in 1991 - as the occupying power(s) would be responsible for that debt (which could be recouped through taxation of Iraq).Of course in 1990, Kuwait was one of Iraq's biggest creditor's being owed US$14bn.

Of course the Irish government covered Goodman to the tune of €200m.

spongebob

Originally posted by shotamoose
...shows debt to Russia at $5bn, debt to France at $4.7bn, to the US at $4bn, to Britain at $1.7bn, and debt to Italy at a whopping $10.8bn.

and as Victor said, Charlie Haughey underwrote Larry Goodman to the tune of €250 Million or so. Goodman mopped up the entire export subsidy budget in the late 80's when he supplied beef to Saddams army on a vast scale. We were stung for around 1% of GNP at the time....a lot.

Pro rata (relative to our economic clout in 1990), only Italy on the above list is owed more by Iraq to the Irish government and thats fairly marginal I make out.

It is an odious debt, morally we can never collect it. If we had instead supplied €250 Million of Gas antidotes to the Kurds at the time we may have a case for reimbursement.

"Did we ****" as the man said to the tribunal.

M

shotamoose

Just an update on this ... In yesterday's White House press briefing the President's spokesman Ari Fleischer said:

The moral issue is an issue that I think you will hear
expressed by the people of Iraq, that in the event that hostilities
ensue and the Iraqi people are freed from the cloak of a brutal
dictatorship that tortures, that kills, people of Iraq will know who
to thank. That will be a moral issue. That will be a moral matter.
That's an approach to this issue.

Which implies that they'll also know whose debts to repudiate, ie not those of France and Russia.