- The Washington Times - Tuesday, December 16, 2003

Less than a week after President Bush said nations that opposed the Iraq war would be barred from lucrative reconstruction contracts, France and Germany said yesterday after meetings with U.S. envoy James A. Baker III that they will offer substantial debt relief to Iraq.

Mr. Baker met yesterday in Paris with French President Jacques Chirac and in Berlin with German Chancellor Gerhard Schroeder, and afterward the three nations released a joint statement on how to handle Iraq’s staggering $120 billion of debt.

“Debt reduction is critical if the Iraqi people are to have a chance to build a free and prosperous Iraq,” the statement said. “Therefore, France, Germany and the United States agree that there should be substantial debt reduction for Iraq in the Paris Club in 2004, and will work closely with each other to achieve this objective.”

Under the rule of dictator Saddam Hussein, Iraq amassed debts of $3 billion to France, $2.4 billion to Germany and $2.2 billion to the United States. Overdue interest payments nearly double some of the debts. In all, Iraq owes about $40 billion to the 19 wealthy nations that make up the Paris Club, a French-led group of official creditors who help debtor nations. Other countries and private creditors are owed at least $80 billion in addition.

While the statement was vague — “The exact percentage of debt reduction that would constitute ‘substantial’ debt reduction is subject to future agreement between the parties,” it said — the White House yesterday applauded the move by France and Germany.

“We appreciate the commitments they made on the need to restructure and reduce the debt burden,” White House Press Secretary Scott McClellan told reporters.

Sources close to the White House say the administration is seeking relief of about two-thirds of the debt owed by Iraq.

With an estimated $8.6 billion worth of reconstruction contracts funded by U.S. taxpayers set to move ahead in the coming months — which only nations that supported the U.S.-led coalition can tap — France and Germany have made a swift effort to call a truce with the United States

The capture of Saddam — which many experts believe will, after a short period of heightened attacks by holdouts of the dictator’s Ba’athist regime, lead to long-term stability in Iraq — also appears to have played a role in the sudden amiability of the two most vehement critics of the war.

“Germany and the United States are — like France — ready not only for a rescheduling, but also a substantial lifting of Iraq’s debt,” said a spokesman for the German chancellor. A spokesman for the French leader said Mr. Chirac agrees “on the need for finding the means to reduce Iraq’s debt in 2004 in the Paris Club, in accordance with the appropriate conditions.”

But the White House gave no indication that debt forgiveness by the two opponents of the Iraq war would result in either getting a piece of the lucrative reconstruction contracts. Mr. Bush said Monday that “the idea of spending taxpayers’ money on contracts to firms that did not participate in the initial thrust is just something I wasn’t going to do.”

Still, Mr. McClellan said yesterday that nothing is set in stone.

“If additional countries want to join the efforts of some 60 countries and the Iraqi people in the overall reconstruction, then circumstances can change,” he said.

As for how to handle Iraq’s debt to the United States, the spokesman said, “That process is just beginning. We are looking at restructuring and reducing the debt.”

“We’ll do our part as well,” Mr. McClellan said. “The United States is the one that led this effort to remove the regime from power. We have made significant contributions along with coalition forces.

“We remain committed to seeing that through, and we will see it through. … I think you can continue to expect the United States to do our part to help the Iraqi people.”

Mr. Baker — who is on a tour of the very nations most disturbed by the administration’s decision to dole out U.S. taxpayer funds only to allies that helped in Iraq — said his meeting with Mr. Chirac was productive.

“The French and the U.S. government want to reduce the debt burden on Iraq so that its people can enjoy freedom and prosperity,” he told reporters in Paris after the meeting. “It is important to reduce the Iraqi debt burden within the Paris Club in 2004, if possible,” he said.

The discussion is perhaps premature. French officials say the Paris Club can only change debt terms with internationally recognized governments, but Iraq will not have such an administration until July 1, when the U.S. forces hand power over to Iraqis.

French Foreign Minister Dominique de Villepin said there would have to be a transfer of power to a sovereign Iraqi government before a debt deal could be signed.

Mr. Baker is scheduled to meet Italian Prime Minister Silvio Berlusconi today. He is also scheduled to visit with British Prime Minister Tony Blair and Russian President Vladimir Putin tomorrow before returning to Houston on Friday.

Russia, another opponent to the U.S.-led war in Iraq, is not as keen as Germany and France to forgive $3.5 billion in debt. “Iraq is not a poor country,” said Russian Defense Minister Sergei Ivanov.

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