No immediate debt relief offered to Iraq

updated 10:35 p.m. ET May 3, 2007

SHARM EL-SHEIK, Egypt - Saudi Arabia said it is still negotiating with Iraq over writing off billions of dollars owed it by the war-torn country, and major creditors Kuwait and Russia failed to offer immediate debt relief — a key goal of an ambitious blueprint launched Thursday to stabilize Iraq.

The absence of major commitments to reduce Iraq’s burdensome debt was a disappointment at a major regional conference in the Egyptian resort aimed at showing support for Iraq — and a sign that some, particularly Sunni Arab nations, are still keeping their distance from Iraq’s Shiite-led government.

Still, the Iraqi government, the United Nations, and many of the more than 60 countries and international organizations gathered here hailed the launch of the blueprint as a milestone.

The International Compact with Iraq sets ambitious benchmarks to achieve a stable, united, democratic Iraq within five years. It defines international help for Iraq — including debt relief — but also sets tough commitments on the Baghdad government, particularly carrying out reforms aimed at giving Iraq’s Sunni Arabs a greater role in the political process.

It was an initiative of Iraq’s first elected government, launched soon after Prime Minister Nouri al-Maliki took office in June 2006 and strongly backed by the United Nations.

The United States has stressed the Iraqi role in organizing the conference, but U.S. diplomats and Secretary of State Condoleezza Rice’s advisers have crisscrossed the globe and worked heavily to drum up support, particularly among Arab nations.

After delegates backed the compact late Thursday by acclamation with a round of applause, a smiling Rice approached U.N. Secretary-General Ban Ki-moon, saying, “You did a great job. This is a wonderful day for all of us.”

But the debt issue loomed large over the meeting’s unfinished business.

Iraq still owes as much as $62 billion
The Paris Club of affluent lender nations has already written off $100 billion of Iraq’s debt — most from former Iraqi leader Saddam Hussein’s war against Iran in the 1990s.

But the government still owes a huge amount. Iraq’s finance minister put the total remaining at roughly $50 billion, but the numbers vary and in some cases are still not resolved — with some estimates as high as $62 billion.

Iraq’s al-Maliki opened the conference urging “all our friends ... to forgive our debts and allow us to launch our reconstruction and development.”

But the foreign minister of Saudi Arabia — a major lender — made no immediate public pledge. Saud al-Faisal said only that his country was in talks with Iraq “to have an appropriate solution to debts in line with rules of the Paris Club,” which calls for forgiving at least 80 percent of Iraq’s debts.

Before the conference, al-Faisal had confirmed that the kingdom would forgive 80 percent of Iraq’s debt, raising expectations of an official announcement Thursday.

U.N. officials said the problem is that Saudi Arabia and Iraq never kept records and haven’t agreed on the size of the debt. Iraq’s finance minister puts the debt at $17 billion while the Saudis have estimated it at between $15 billion and $18 billion.

Kuwait is owed $15 billion, but its democratically elected parliament is refusing to consider any debt relief to Iraq — and the country’s deputy prime minister didn’t mention the issue. There was also no mention of writing off the $13 billion Russia is owed.

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