Iraq's debt... guess to stands to lose should Saddam fall?

Discussion in 'General Discussion' started by 1952Sniper, Mar 8, 2003.

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  1. 1952Sniper

    1952Sniper New Member

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    (2/15/03 9:46:55 pm)
    Reply Iraq's debt... guess to stands to lose should Saddam fall?
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    Obviously, France and Russia are selling us out for $$$.

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    Iraq's Odious Debts - National Post, Canada, (12/02/03)

    By Lawrence Solomon, is executive director of Urban Renaissance
    Institute and Consumer Policy Institute, Divisions of Energy Probe Research Foundation.

    Russia and France have good reason to oppose a war with Iraq: They stand to lose more from Saddam Hussein's ouster than any other countries in the world.

    Russia is the world's largest holder of Iraqi debt, a legacy of Soviet-era military sales that is unlikely to be repaid should Saddam's regime fall. In a recent Washington meeting of Iraqi exiles, the Iraqis decided to honour debts incurred for legitimate civilian purposes in a post-Saddam Iraq, but to repudiate debts incurred for illegitimate military purposes.

    Russia's fragile economy can ill afford this debt repudiation, estimated at US$12-billion, particularly since Russia's oil industry will suffer should a post-Saddam Iraq rapidly step up production, collapsing the price of oil. Neither can Russia countenance losing its lucrative oil concessions in Iraq, which it won under questionable circumstances and which a new Iraqi government may challenge. The legitimacy of contracts with sovereign nations ultimately rests upon the legitimacy of the nations' rulers, who, in effect, act as agents for the state.

    Saddam Hussein's regime has no legitimacy among most of Iraqi's various minorities or its Shiite majority. A challenge by a successor Iraqi regime of Russia's extensive interests in Iraq -- the recovery of Russia's outstanding debt as well as the exploitation of its oil concessions -- may well meet with success.

    Next to Russia, France is Iraq's largest creditor and also unlikely to recover its debt. France has been a knowing accomplice in Saddam's subjugation of Iraqis and, in many ways, the West's most important arms supplier to Iraq, providing Mirage jets and Exocet missiles among other weapons. Like Russia, France has a major stake in Iraq's oil fields: French oil giant TotalFinaElf holds Iraq's largest oil stake, with exclusive negotiating rights to develop Majnoon and Bin Umar, fields with reserves totaling 26 billion barrels.

    These commercial relations are now at great peril for both France and Russia, Iraq's largest non-Arab trading partners. Until recently, these two countries had expected to capitalize on the close relationship that they had cultivated with Saddam, following the lifting of UN sanctions on Iraq. The U.S. drive to oust Saddam's regime dashed these expectations; worse, the U.S. actions threaten to cost France and Russia their past investments, creating economic debacles of major proportions.

    The Doctrine of Odious Debts, though it has been little used, is well known to France, Russia and the United States. The doctrine originated a century ago with the Spanish-American War, when 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.

    After the Russian Revolution of 1917, when the Bolsheviks attempted to repudiate Russia's debts indiscriminately, the Doctrine of Odious Debts was developed to determine which debts were legitimate and which illegitimate. This work was conducted by Alexander Nahum Sack, a professor of law in Paris, who authored two major works on the obligations of successor systems and coined the phrase, "dettes odieuses." According to the doctrine, the debts accumulated by despots were "personal" to the despot, giving lenders no
    recourse: "The creditors have committed a hostile act with regard to the people; they can't therefore expect that a nation freed from a despotic power assume the 'odious' debts, which are personal debts of that power."

    Apart from Great Britain v. Costa Rica, where Chief Justice Taft of the U.S. Supreme Court, sitting as an arbitrator, decided in 1923 that loans made by the Royal Bank of Canada to the regime of a Costa Rican dictator were personal, successor states have been reluctant to invoke the Doctrine of Odious Debts, out of fear that international lenders would boycott a fledgling regime. This is the case in South Africa, where a large segment of the population wants to brand apartheid-era debts as "odious," after Desmond Tutu's Truth and Reconciliation Commission endorsed the concept. The reluctance to use the doctrine may soon change, in part because a proposal by Harvard economists to establish an international body to adjudicate odious debts has caught the attention of the International Monetary Fund, which has been giving the concept official heft by promoting it at an IMF seminar and in the IMF's quarterly journal, Finance and Development. Scholars at the London School of Economics and McGill University have also given the concept credibility, as has its adoption by the world's churches, through the Jubilee debt-relief movement, and citizens' groups throughout the Third World.

    But necessity -- on the part of the new Iraqi regime and on the part of the Bush administration -- may also drive the doctrine's adoption. Because Saddam all but bankrupted Iraq in his ruinous war with Iran, Iraq was unable to service its debt through its oil earnings, even prior to the Gulf War. Saddam attempted to seize Kuwait, in fact, partly to service its debts to the countries that financed its military buildup.

    Today, Iraq's financial straits are more dire still -- its oil fields are in disrepair while its debt has increased -- and it also faces immense Gulf War reparations for the damage it inflicted on Kuwait and its oil fields. To become solvent and a model for responsible government in the Middle East, to be credible with its own oppressed populations, which will not want to be taxed to repay the regimes that armed Saddam against them, a successor Iraqi government will need to shed debt as well as restore oil production.

    The Bush administration may soon face vexing choices. Will it attempt to divide the Iraqi spoils among its allies, including Russia and France should they ultimately decide to support a war effort, and thus create cynicism throughout the Middle East and the world? Or will the Bush administration attempt to make Iraq a showcase for responsible government in the Middle East by enabling the Iraqi people to cast off the odious debts brought upon them by an illegitimate regime and by giving the other peoples of the region an inkling of what a future without odious rulers could hold for them.

    Lawrence Solomon is executive director of Urban Renaissance Institute and Consumer Policy Institute, divisions of Energy Probe Research Foundation.

    E-mail: [email protected]
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    My idea of an agreeable person is a person who agrees with me
     
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