April 27, 2003

April 27, 2003 | Commentary on Middle East

Give Iraq a Clean Slate

You know we live in unusual times when the French accuse the Americans of acting arrogantly in Iraq, and the Germans refuse to fight.

And here is one more sign: The anti-globalization movement may have the best insight yet when it comes to recovery in Iraq. The anarchists and the mini-hippies, who regularly crowd the streets of Washington and other capitols in search of something to protest, are fairly consistent in one demand at least: They want Third World debt relief. So does the European Union, which has lobbied vigorously at the United Nations and the World Bank for the crushing debt of Third World countries to be lifted.

Debt relief, that's it. Whatever else the Iraqis need, and the list is long, they most certainly need debt relief. Billions of dollars are owed in French, German and Russian debts that could cripple the Iraqi economy irreparably were repayment demanded of the new Iraqi government.

So, let's give the new government a clean slate, and let's do it in the spirit of multilateralism. This is an opportunity not to be missed by those who pretend to be speaking on behalf of the developing world. It is a wonderful chance for these great champions of the Iraqi people to put their money where their mouth is.

After 20 years of Saddam Hussein's reign, the phenomenally oil-rich Iraq is also one of the most impoverished nations in the world. In fact, when it comes to international debts, Iraq holds the record. According to the Center for Strategic and International Studies, Iraq's total debt is in the neighborhood of $127 billion, of which $47 billion is in accrued interest.

As if that wasn't enough, Iraq also owes $199 billion in Gulf War compensation, and $57 billion in pending contracts with foreign companies. And guess where most of those hail from? They are based mostly in those countries that sought to block American military action against Saddam's brutal dictatorship through the U.N. Security Council, a fact that was obscured by high-sounding rhetoric in the negotiations leading up to the war.

This translates into a debt of $16,000 for every man woman and child in Iraq, 25 times the debt of Brazil or Argentina. As U.S. Treasury Secretary John Snow has stated, the Iraqi people cannot bear the burden of the current debt level. This is especially true given that we now know where some of that money has gone. Almost $1 billion in dollar bills has been dug out of basements and even dog kennels in Iraq where it had been squirreled away. An estimated $6 billion has been shipped to foreign bank accounts by Saddam's family.

Much of the Iraqi debt is owed to other Arab countries, but a significant portion could be relieved by Russia, France and Germany. Debt relief would be especially appropriate given that much of the money owed was spent on weapons purchases by a dictator who is no longer in power. Thus France is owed some $6 billion by Iraq, and Russia $7 billion to $8 billion. German figures go into the billions as well.

One of the reasons that these countries have chosen to hold out on their money is that Iraq in years to come, under the right conditions, holds out the promise of great wealth. Iraq is second only to Saudi Arabia in oil wealth and can be counted to finance its own rebuilding once that wealth is tapped.

That, however, could take a while. Under Saddam, oil exploration and development more or less came to halt and production stagnated. It has barely increased since 1980 -- about 2,000 barrels per day. (Saudi Arabia produces between 7,000 to 8,000 barrels per day). Not only will Iraq need investments in its oil sector to get the black gold flowing again, but it has been suggested by the Bush administration that the proceeds should be targeted at the Iraqi people, to rebuild their country and lift them out of poverty. They should not end up in the pockets of the people who helped perpetuate Saddam's regime.

You would think that the Germans of all people would understand this. (Then again, you would also think that the Germans of all people would have understood the importance of removing a brutal, totalitarian dictator.) After World War I, the crippling war reparations imposed on Germany by the victors in the Versailles Treaty helped fuel German rage and thirst for revenge, and it helped destroy the German economy and fledgling Weimar Republic between the world wars. The result was the power grab that brought Adolph Hitler to power in 1933 with the agreement of the suffering German people.

Debt relief will be one step in the long recovery process of the Iraqi people. The United States, Britain and our other allies have freed them from oppression. Now their international debtors should step up to the plate.

-Helle Dale is deputy director of the Davis Institute for International Studies at The Heritage Foundation.

Originally appeared on FOXNews.com.

About the Author

Helle C. Dale Senior Fellow for Public Diplomacy
The Margaret Thatcher Center for Freedom