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RE: [casi] Questions Raised by Lifting of Sanctions

Dear Suzy,

Thank you for your e-mail, and for its questions.  Yes, recent events have
been very disorienting as the issues have been changing quickly.

> 1)       Is it fair to the people of Iraq that, with Saddam Hussein's
> regime toppled, 5% of its oil sales will continue to go to
> the UN Compensation Commission?

The Compensation question has been difficult because there were clearly
innocent victims of the 1990 invasion of Kuwait.  Over the years, though,
the smallest claims have been addressed, leaving now only large claims.
Thus, claimants are generally much wealthier than are the Iraqis who forgo
income as a result of the Compensation Commission.  I therefore think, on
equity grounds, an argument can be made for reducing the share to 0%.
Whatever level it is, I think it unlikely that it will rise again.  (I wrote
an article for the Middle East Economic Survey a few weeks back which
touched on this.  It can be seen at

> 2)       Does anyone know what Iraq's $400 billion debt
> includes?  Money
> legitimately owed Russia from before the first Gulf War?
> Money for reparations for damages done by Iraq during the
> first Gulf War-also under the toppled Saddam Hussein?

This is also addressed in the article, above.  On the first Gulf War
reparations, my understanding is that Iran claims that it is owed
reparations; there seems to be little possibility that any will be paid.

> 3)       Who has the authority, or claims they have the authority, to
> manage or forgive Iraq's $400 billion debt?

Debt holders, like the owners of other financial assets, can dispose of
their assets (e.g. forgive the debt).  I don't have a good sense of who owns
the debt now: governments or financial institutions that lend can then sell
their debt contracts on secondary debt markets.  When this happens, they
trade below face value.  Thus, the debt of a highly indebted country may
trade for 20 cents on the dollar; this roughly indicates a belief by the
market that there's a fairly low probability of the debt being repaid.
Iraq's 1980s debt has been traded on these markets, and climbed in price in
the lead up to the full war.

> a)       With Saddam Hussein gone, why isn't Iraq's slate
> wiped clean of debt to give the Iraqi people a fresh start?

Again, see the article above.  Legally, public international law does not
regard changes of government, or absences of government, as influencing the
continuity of a State, or its legal obligations.  To understand why this is,
imagine that Labour lost the next election in the UK - suppose to the
Tories.  If the Tories could then claim that debts incurred to finance
government spending under Labour would not be honoured, then potential
lenders today would charge much higher rates now to lend to the present
government.  From this point of view, Iraq's debts remain, as do its
requirements to continue with the other contracts in which the previous
government entered.

That's the legal argument.  More humanely, I think that there are strong
moral arguments for campaigning for debt forgiveness: the 1980s debt was
incurred by a dictator; it presently represents a heavy burden on the Iraqi
economy, even if it is not serviced, as it hangs a cloud over investment

> 4)       As CASI announced in its most recent press release, with
> sanctions on Iraq lifted, CASI's mission will soon be over.
> Because, as a writer, I intend to continue tracking what's
> going on in Iraq, I will miss the up-to-the-minute newspaper
> articles and other resources the discussion list brings to
> our attention, as well as the members opinion on them.  Would
> anyone else besides me like to see CASI converted to
> something like an "Iraq Monitor" to stay on top of whether or
> not Iraq is getting a fair shake?  Any interest?

Yes: I agree strongly.  Iraq is entering a very fluid period now, in which
there is potential both for real improvements - development of a strong and
independent civil society, the restart of economic development - and for
deepening tragedy - US policy toward Iraq has been harmful for at least 25
years, and it is now given very sweeping powers over Iraqis' lives, with
very limited scrutiny.  I think that those of us in the US and the UK, as
citizens and residents of Occupying Powers, have a responsibility to ensure
that the Occupation is as brief and as just as possible.  A necessary
condition for this is that we continue to pay close attention to
developments in Iraq, and demand answers from our elected representatives.
Thus, I think that many of the tasks of this new period do not differ from
those of the sanctions period.  This discussion list, for example, should
clearly continue - whoever hosts it.


Colin Rowat

work | Room 406, Department of Economics | The University of Birmingham |
Birmingham, B15 2TT, UK | | ( 44/0) 121 414 3754 |
(+44/0) 121 414 7377 (fax) |

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