Bush sends debt-relief message to Europe

President Bush yesterday said forgiving Iraqi debt would be “a significant contribution” to postwar reconstruction efforts and suggested that such a move by France, Germany and Russia might be enough to permit those countries’ companies to compete for prime contracts to rebuild Iraq’s infrastructure.

That message will be delivered to Europe next week by former Secretary of State James A. Baker III, whom Mr. Bush has tasked with urging European powers to forgive or reconfigure the $120 billion in debt racked up by Saddam Hussein.

The diplomatic mission is complicated by the anger of France, Germany and Russia over the U.S. policy of doling out $18.6 billion in Iraq reconstruction contracts solely to countries that contributed to the war effort.

“If these countries want to participate in helping the world become more secure by enabling Iraq to emerge as a free and peaceful country, one way to contribute is through debt restructuring,” Mr. Bush said yesterday.

Mr. Bush did not equate debt forgiveness with inclusion on his list of 63 countries eligible for primary contracts, but he made it clear that countries that committed troops to the liberation of Iraq will get preferential treatment in rebuilding the country with U.S. funds.

“It’s very simple,” Mr. Bush said. “Our people risk their lives. Friendly coalition folks risk their lives, and, therefore, the contracting is going to reflect that. That’s what the U.S. taxpayers expect.”

However, half of the 63 countries on the list did not send troops to Iraq. White House spokesman Scott McClellan said those countries earned their status by backing the war when Mr. Bush first began to solicit support from the United Nations.

“They were part of the effort from the beginning,” Mr. McClellan said. “There were a variety of ways that people could signal their support or help in our efforts in Iraq.”

Asked whether a country that agreed to forgive or restructure Iraqi debt would join the list of favored nations, Mr. McClellan said, “Circumstances can change.”

Pressed to clarify, Mr. McClellan said he would not “speculate about things from this podium.”

“We will have discussions with countries if they want to discuss this [contracting] decision, or if they want to discuss matters relating to the restructuring of the debt,” Mr. McClellan said, adding that countries not on the list can still participate in Iraq’s reconstruction as subcontractors to the favored nations.

This diplomatic flap arose Tuesday upon the release of a memo written by Deputy Secretary of Defense Paul Wolfowitz. Limiting prime contracts to cooperative countries, he wrote “will encourage the expansion of international cooperation in Iraq” and “encourage the continued cooperation of coalition members.”

The policy of awarding primary contracts to coalition members first was announced by the Pentagon during a conference about Iraq’s reconstruction in London on Nov. 21 — though the list of coalition members had not yet been drafted.

“It’s only a flap now because it’s on a piece of paper,” said a Pentagon source on the condition of anonymity. “This policy has been public for some time.”

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