LONDON, 12 July 2003 — The Paris Club of sovereign creditors said yesterday debts owed by Iraq to its member states amounted to $21.018 billion up until the 1990 invasion of Kuwait and up to the same amount in interest arrears.
“According to their preliminary estimates, the total public debt of Iraq vis-a-vis Paris Club creditors (including Brazil and Korea) amounts to $21,018 billion, almost exclusively in arrears,” the Paris Club said in a statement.
Iraq invaded Kuwait on Aug. 2, 1990, drawing immediate sanctions from the UN Security Council that barred all trade and financial dealings except for humanitarian purposes.
The Paris Club said that it, along with others such as the United States, did not expect Iraq to be in a position to start repaying debts until the end of 2004. The figures refer to the principal alone and not to interest arrears, which the Paris Club said could be an amount equal to the principal.
They represent a crucial first step in either reducing or rescheduling Iraq’s huge debts, which could be as much as $120 billion. “All this debt results from credits contracted before Aug. 2, 1990. This total amount takes into account for Russian claims the adjustment on Soviet era claims consistent with Paris Club methodology,” the creditor body said.
The biggest creditor of Iraq among Paris Club countries is Japan, which is owed $4.108 billion in principal, followed by Russia, which is owed $3.450 billion, France with $2.993 billion, Germany with $2.403 billion and the United States with $2.192 billion. Britain, which was the main US partner in the war to oust Saddam Hussein, is owed $930.8 million. “This was the necessary first step, the figures are very precise, this first stage of the reconciliation of the debts has happened,” said Richard Segal of emerging market debt specialist Exotix.
He said it was positive that the Paris Club had reached an agreement on Russia’s portion of the debt. “They came to agreement on Russia’s portion and appear to have negotiated down Russian claims slightly more than we had expected,” Segal said.
The Paris Club numbers do not take account of several key classes of debt, mostly to Gulf States, which amount to some $35 billion, depending on whether they are treated as loans or aid.
They also exclude commercial debt, which is traded in an illiquid market, currently at around 25-30 percent of face value, based on a broad average of different debt classes. What the Paris Club move does however is start a process whereby international bodies like the International Monetary Fund can get involved and finance can be mobilized for Iraq.
