Bremer, Bono and $200 billion

President Bush's request of another $87 billion for securing and rebuilding Iraq has to be added to the $70 billion already spent there. Add to that $157 billion another $50 to $60 billion that various reports say will be needed and you've got a pricetag well over $200 billion.

But there's another $200 billion lurking here as well — Iraq's existing foreign debt. In a case of "you broke it, you bought it," that debt gets inherited by the Coalition Provisional Authority — which is to say, by America. Here's some background from a Congress Daily report:

[Sen. Richard] Lugar [R-Ind.] said Iraq's $200 billion debt to other nations dwarfed that of Germany after World War I. … [CPA chief L. Paul] Bremer said last week that oil revenues instead should be used to pay down the nation's $200 billion in international debt. But [Sen. Ted] Stevens [R-Alaska] said a provision in his bill would prevent any funds from being used to repay debt run up by Saddam Hussein's regime.

Welcome aboard Sen. Stevens! It's good to see the senator now embracing an argument that has been promoted for years by groups like Jubilee and DATA.

The argument goes like this: If a kleptocratic tyrant's regime is illegitimate, then any foreign debts secured by that tyrant are illegitimate. A dictator like Saddam Hussein, Ferdinand Marcos or Mobutu Sese Seko does not govern with the consent of his people. The people cannot, therefore, be held morally or legally responsible for any contracts or debts entered into by that tyrant.

Note that this is not a plea for "debt forgiveness." It is a declaration that these debts are no longer valid. The debtors no longer exist, the lenders lose.

The Powers That Be — international lenders, multinational banks and Western governments — have not previously found this argument persuasive. There was simply too much money at stake. Sure, it may have been foolish, short-sighted, risky and immoral for banks to lend all that money to a thug like Mobutu, but you can't expect those banks to live with the consequences of their own foolishness. The Powers That Be cannot accept that all that money — like those tyrants themselves — is simply gone. They demand repayment — and they demand it from the victims of those former tyrants.

Now that the United States has inherited $200 billion of this dubious, dictatorial debt, it's not surprising that suddenly people like Stevens have seen the light. But don't expect Stevens to succeed in declaring Saddam's debts illegitimate. TPTB would view that as a dangerous precedent. It won't be allowed.

That's why Bremer has said that the CPA/U.S. is now responsible for paying off Saddam's international credit cards. Propping up dictators is an important part of the global economy, and the U.S. isn't about to undermine such a lucrative enterprise just for a measly $200 billion.

Some of that $200 billion, however, does not represent debt, per se, but other kinds of financial obligations. It includes the billions in reparations still owed to Kuwait following Saddam's invasion and looting of that country in 1990.

If you buy the moral and legal logic of the debt cancellation argument, then you might still view obligations like this as legitimate. Kuwait's claim to reparations as a victim seems stronger than a multinational bank's claim as someone who lent money to Saddam Hussein's regime.

But Bremer is arguing the opposite, according to Arab Times:

The US Saturday urged, through its Civil Administrator for Iraq Paul Bremer, to consider dropping demands for billions of dollars in war reparations from Iraq for losses caused by deposed president Saddam Hussein's forces in 1990 and 1991. Bremer made these calls Saturday during a Pentagon briefing on the situation in Iraq.

In making this case, Bremer sounds like he's channeling Bono:

Bremer said "it is curious to me to have a country whose [annual] per-capital income GDP is about $800 pay reparations to countries whose per-capital GDP is a factor of 10 times that," for a war which all Iraqis now in power opposed.

He'll make this argument about the reparations owed Kuwait because it's a unique case. It doesn't involve TPTB in the international lenders, only the unsympathetic Kuwaitis. Their response is predictable, and far more consistent than Bremer's argument:

"If the United States is so sympathetic to Iraq and asking Kuwait to drop its compensation demands… why shouldn't it cancel the debts of poor countries?", said MP Daifallah Buramiya. He warned the government against even trying to tamper with or rescheduling compensation or debt owed by Iraq.

"Why shouldn't it cancel the debts of poor countries?" Good question.

  • http://www.jamesrmaclean.com/archives/000413.html Hobson’s Choice

    Debt Forgiveness

    Several days ago the White House undertook negotiations to forgive the debts of Iraq, which are huge (Reuters, AFP). Iraq is believed to be able to generate $20 billion in oil revenues annually. That’s equivalent to 1.4 million barrels a…


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