Iraq owes several nations a total of $120 billion. The greatest amount, more than $80 billion, is owed to Russia. That amount of debt is seen as a major obstacle to Iraq rebuilding its infrastructure and establishing a new, post-Saddam government.
Debt reduction is critical if the Iraqi people are to have any chance to build a free and prosperous Iraq, according to a statement by George W. Bush, Jacques Chirac, and Gerhard Schroeder, the leaders of the U.S., France and Germany, respectively.
President Bush sent former Secretary of State and member of the Carlyle Group, James Baker, to meet with the heads of those nations owed the most money by Iraq.
Baker won agreement from the French and Germans to reduce the amount of the debt owed them. Russia, however, through its leader, Vladimir Putin, said it would not forgive any part of the debt it is owed. He then retracted his position after U.S. special envoy James Bakers visit. The full extent of what Putin received in return has yet to be determined.
The Associated Press reported Germany had serious doubts about such an arrangement but was placated by Baker. Both Germany and Russia were said to be angered by the Pentagons refusal to allow them to share in the reconstruction of Iraq.
Defense Secretary Donald Rumsfeld said the matter is something for negotiation between U.S. agencies.
Britain earlier said it supported the idea of substantial reduction of the Iraqi debt. The French newspaper, Le Figaro, quoted Foreign Minister Domenica de Villepin, on that topic. That will have to be done within the framework of the Club of Paris, after an agreement with the IMF (International Monetary Fund) and when a sovereign government is installed, de Villepin said.
The Club of Paris consists of 19 nations that are creditor states. The Paris Club will agree to a deal with Iraq as soon as there are Iraqi authorities in place, when they are internationally recognized and when the International Monetary Fund has analyzed what scale of debt relief is necessary, said Club of Paris President Jean-Pierre Jouyet, as reported by Reuters News Service.
Iraq owes about $40 billion to the members of the Club of Paris. The topic will come up again when the club meets next month. That time is seen as too early for any serious bargaining.
Some sources close to the club say Germany and Japan are not completely happy with plans to use more flexible rules in deciding on the level of debt relief. Yet Japan has also joined the debt relief as well.