Iraq Economy

Profits and loss

Jeff Leys — Thu, 17 May 2007 08:09:27 -0500

Short Information Teaser

The role of international oil companies in siphoning off Iraq's oil wealth

Excerpt

Ewa Jasiewicz
ewa@platformlondon.org
The Guardian Unlimited
May 15, 2007
For information on Iraq’s oil law: PLATFORM and Hands Off Iraqi Oil

Today, shareholders are converging in London and The Hague for Shell’s annual general meeting. As investors hobnob in the Champagne Suite of the Hammersmith Novotel, those working in the oilfields that the company seeks to control are ready to strike over an oil law that Shell has helped to craft.

The focus is the culmination of four years campaigning by the Iraqi Federation of Oil Unions (IFOU). Demands range from bread and butter issues such as land allocation, unpaid wages, holidays, health and safety and full-time status for temporary workers, to wider political issues which have been the founding bedrock of the union: protection of Iraq’s oil wealth from foreign companies and a say in the future of the oil industry. Shell is one of the companies that the union has cautioned against entering Iraq “under the guise of so-called production sharing agreements”.

Body

Ewa Jasiewicz
ewa@platformlondon.org
The Guardian Unlimited
May 15, 2007
For information on Iraq’s oil law: PLATFORM and Hands Off Iraqi Oil

Yet Shell has had a say and a proposed stake in the future of Iraq’s oil industry for as long as the union has been organising. Whereas the demands of the union have been ignored, Shell, through doors blown open by the war and occupation, has accessed government decision makers and lobbyists on a regular basis.

Shell has been positioning itself to sign long-term exclusive contracts with the Iraqi government for the past four years. Ever since Shell misled investors over its reserves to the tune of 4bn barrels, it has been seeking replacement reserves. With 115bn barrels of proven reserves, occupied Iraq is where the prize still ultimately lies.

February saw the Iraqi cabinet approve a controversial hydrocarbon law. The law will grant foreign companies the dominant role in developing Iraq’s reserves. If approved by parliament, foreign companies will have access to the largest reserves open to private control on the planet.

Neighbouring Saudi Arabia and Iran (first and second in the world oil-wealth stakes) do not have production-sharing agreements, the type of contract that the oil law proposes. They use technical service agreements, or buyback contracts, that leave decision-making powers including development, rates of production and extraction, to the state. Private oil companies there act as contractors rather than controllers.

The current Iraqi oil law will allow foreign companies to control production, with potentially unlimited profits in Iraq’s undeveloped fields - accounting for two-thirds of Iraq’s known reserves. This is to be done by production-sharing agreements - defined by critics as a form of privatisation by stealth. Under production-sharing agreements, foreign companies will put capital upfront to explore for oil and shoulder the risk if none is to be found or it is difficult to extract.

Iraq, however, is home to some of the easiest oil to access. Known as “low hanging fruit” by the industry, extraction costs range from $1-$1.50 per barrel. Under terms to be agreed by contract, the state would then relinquish a fixed percentage of profit to oil companies for a period of up to 30 years. The terms and conditions agreed in 2007 - under conditions of war and occupation - could last a generation until 2037, with virtually no opportunity to renegotiate.

Companies like Shell would expect concessions to offset the risks of working in a dangerous country like Iraq. Risk, as with all capital ventures, presents opportunity. The risk represented by massacres in Haditha and Fallujah, the car bombings and terror on the streets of Baghdad, military air raids, sieges, walls of separation, kidnappings and assassinations all figures into the balance sheets of companies like Shell.

Shell was a key player in moulding the current oil law. Shell representatives, along with those of eight other oil majors, the US and UK governments and the International Monetary Fund, saw the law just weeks after it was written in July 2006. It would be eight months before the law would be presented to Iraqi MPs. Shell commented upon and influenced the law throughout its drafting process.

Since July 2006, the British government has worked earnestly to influence the law, repeatedly consulting with Shell on the type of contracts it would like to obtain. Through the oil industry lobby organisation International Taxation and Investment Centre, Shell - along with six other major oil companies - has been pressuring the Iraqi government to grant long-term contracts that would give them exclusive rights to extract Iraq’s oil. The British government, through the Foreign Office, has been helping, delivering a report strongly advocating production-sharing agreements to the Iraqi government.

Shell’s involvement in shaping domestic economic policy in Iraq stretches back to March 2003. Just days before the bombing of Baghdad, senior Shell managers met at 10 Downing Street to insist that Iraq’s oil should benefit not just US companies, but European companies too. A month later, 100 workers activists from the Southern Oil Company formed the Southern Oil Company Union, with the explicit aim of securing workers rights and defending Iraq’s oil from privatisation. American companies were shown the door by the union when they tried to work in the fields. The Union faced down British soldiers in protests over three months of unpaid wages and won. Membership leapt from 100 to 3,000.

From February to September 2003, former Shell CEO Philip Carroll worked with the coalition provisional authority on plans to restructure the Iraqi oil industry. Meanwhile, Iraqi oil workers embarked on a reconstruction effort - rebuilding drilling rigs, pipelines and refining and port equipment.

Union leaders also deconstructed Bremer’s order 30 wage table - arguing that Iraqi oil workers needed more than the occupation set minimum wage of 69,000 Iraqi Dinar (approximately £30 per month). After threatening to shut down exports, the union succeeded in eliminating the last two categories of the wage table and won a new minimum rate in the oil sector of 102,000ID (£45) per month. Membership and confidence swelled.

In 2004, Shell hired a Dubai-based exploration and production executive to act as its “country chairman” for Iraq - the most senior overseas post in the business. To assist the new chairman, Shell sought an Iraq lobbyist, advertising for “a person of Iraqi extraction with strong family connections and an insight into the network of families of significance within Iraq”. In the same year, workplace elections were held in the Maysan, Basra and Dhi Qar provinces, creating the General Union of Oil Employees (GUOE). Candidates with strong connections and credentials among the workforce were chosen to lead in nine oil and gas companies. The establishment of the GUOE significantly strengthened networks of influence and organisation for working people in the southern oil sector and their communities. Union membership now stands at 26,000 across four governorates in the south.

So the view of a black goldrush that may have glittered from The Hague and London just got hazier. The organisational strength of the IFOU could be a major spanner in the works of Shell’s lobbying and legal mechanisms. The IFOU has repeatedly warned companies like Shell to keep out of Iraq’s oil fields. Union president Hassan Jumaa recently said of the strike: “The federation calls on all unions in the world to support our demands and to put pressure on governments and the oil companies not to enter the Iraqi oil fields.”

Questions will be asked both inside Shell’s AGM and outside, through a peaceful protest, about the ethics of its policies in Iraq. Likewise, through the efforts of Iraqi unions, the debate in Iraq will expand on who really does have the right to control Iraq’s oil. Who will decide the fate of the resource that accounts for 95% of government revenue? And who should have a say in the future of Iraq’s economy - Shell or the people of Iraq?

Ewa Jasiewicz is a writer, journalist, human rights activist and union organiser. She is currently works for London-based human rights and environmental organisation Platform and with Hands Off Iraqi Oil.

Challenge to the Supreme Court: Can the U.S. Kill Iraqi Children Legally?

voices — Fri, 05 Jan 2007 16:47:50 -0600

Short Information Teaser

Bert Sacks asks the question: Not were the economic sanctions barbaric, but were they legal?

Excerpt

January 5, 2007

By Bert Sacks

Bert Sacks has visited Iraq 9 times since 1996. Below are two recent op-eds by Bert.

“Imagine if a U.S. cruise missile were to land on a kindergarten and kill 165 children. Imagine now that it was launched knowing it would hit that kindergarten, and further, that one of these missiles was launched at a different kindergarten every day for a month. That’s 5,000 children.

“To kill that many children as a matter of state policy would be unspeakable. The American commander in chief would be condemned as a barbarian. And yet, that is what the economic embargo of Iraq has done.”

For ten years I have wanted to ask one very basic question: Not were the sanctions barbaric. But were the sanctions legal?

Body

January 5, 2007

By Bert Sacks

Bert Sacks has visited Iraq 9 times since 1996. Below are two recent op-eds by Bert.

This is from a Seattle Times editorial six years ago. For ten years I have wanted to ask one very basic question: Not were the sanctions barbaric. But were the sanctions legal? Could the U.S cause the deaths of thousands of Iraqi children every month for years and do so legally?

I will finally get a chance to ask this of the U.S. Supreme Court in a petition I’ll file this month.

I need to show what deaths occurred and why: UNICEF reported “there would have been half a million fewer deaths of children under-five [in Iraq] during the eight year period 1991 to 1998.” The New England Journal of Medicine explained: “The [Gulf War] destruction of the country’s power plants had brought its entire system of water purification and distribution to a halt, leading to epidemics of cholera, typhoid fever, and gastroenteritis, particularly among children.”

In 2004, Robert Fisk (British International Journalist of the Year seven times) put it this way: “In other words, the United States and Britain … were well aware that the principal result of the bombing campaign—and of sanctions—would be the physical degradation and sickening and deaths of Iraqi civilians. Biological warfare might prove to be a better description. The ultimate nature of the 1991 Gulf War for Iraqi civilians now became clear. Bomb now: die later.”

Did U.S. officials intend this or understand it’d occur as a result of U.S. policies? In 1991, USAF Colonel Warden (called the architect of the Gulf Air War) said we bombed Iraq’s electrical plants for “long-term leverage.” Another Pentagon bombing planner stated more candidly: “People say, ‘You didn’t recognize that it was going to have an effect on water or sewage.’ Well, what were we trying to do with [UN economic] sanctions – help out the Iraqi people? No. What we were doing with the attacks on infrastructure was to accelerate the effect of sanctions.”

In 1998, Senator Craig of Idaho testified in a Senate hearing on Iraq sanctions: “The use of food as a weapon is wrong. Starving populations into submission is poor foreign policy.” In 1996, Madeleine Albright famously said on national TV that the deaths of half a million Iraqi children were “worth the price”—but that no child would have died if Saddam just complied with the UN. But she contradicted her own position and Secretary of State Baker in 1991 when he informed Congress, “UN sanctions [would stay] in place so long as Saddam remains in power.”

No one can say that our government officials didn’t know what their policies were doing.

In 1997, I traveled to Iraq to deliver medicine to desperately needy civilians. In response, the U.S. government fined me $10,000. I announced I’d refuse to pay the fine. Several Seattle attorneys offered pro bono support. Our case began in district court and then to appeals court.

Despite widespread notions to the contrary, it was not hard to show that U.S. policies lethally targeted civilians, using famine and epidemic as tools of coercion, violating international law.

But the courts declined to invalidate the U.S. embargo. According to the trial court, provisions of the Convention on the Rights of the Child didn’t count because the U.S. (along with Somalia) hasn’t ratified it. The Geneva Convention is not “self-executing” so it doesn’t help me! And the Genocide Convention, which was partially ratified, created no “substantive or procedural right enforceable by law by any party in any proceeding.” Finally, the court ruled, if Congress wants to violate customary international law it may do so and the U.S. courts are powerless to stop it.

I hope the Supreme Court will decide otherwise. The issue is simple: there are certain norms of international behavior—often called ‘jus cogens’—that are so fundamental to the rule of law that no nation may violate them. Genocide, wars of aggression, war crimes, and crimes against humanity are among them. So is the killing of 500,000 children to coerce a foreign government.

Bert Sacks, who lives in Seattle, has been fined $10,000 by the U.S. government after going to Iraq to distribute medicine; Sacks has refused to pay any fines. More of his writings are at: bertoniraq.blogspot.com.

Can You Imagine

by Bert Sacks

“Can you imagine …”

With these words, Israeli author Amos Oz offers the beginning of an answer to his query, “How to cure a fanatic” (the title of his newest book).

“I can’t help thinking,” he writes, “that with a slight twist of my genes, or of my parents’ circumstances, I could be him or her, I could be a Jewish West Bank settler, I could be an ultra-orthodox extremist, I could be an oriental Jew from a Third World country; I could be anyone. I could be one of my enemies.”

“Imagining the other is a moral imperative.” Maybe it’s the hardest work we can do.

With the recent power outages around Seattle, we’ve been given a chance to do just that. In a very small way we might begin to imagine being an Iraqi over the past 16 years.

During my nine trips to Iraq, there were always electrical outages. On my first trip in 1996 we slept in a hotel with no electricity and kerosene lamps.

L. Paul Bremer said Iraq’s electricity problems were caused by 30 years of neglect. This might make us feel good, but it is not the truth. In 1990 Iraq had a modern electrical grid.

The Washington Post told us about Iraq after the Gulf War: “The worst civilian suffering, senior [American] officers say, has resulted not from bombs that went astray but from precision-guided weapons that hit exactly where they were aimed – at electrical plants …. Now nearly four months after the war’s end, Iraq’s electrical generation has reached only 20 to 25 percent of its prewar capacity of 9,000 to 9,500 megawatts. Pentagon analysts calculate that the country has roughly the generating capacity it had in 1920 – before reliance on refrigeration and sewage treatment became widespread.”

Can you imagine you are an Iraqi? One family told me they had no electricity for six months in 1991. Years later they still suffered power brownouts for hours every day.

I experienced this one summer in Basra in 2000, where the temperature was around 120 degrees. We sat around the living room floor in a poor family’s home. At six o’clock it was their turn to get electricity and the ceiling fan began to turn. One of the Iraqis looked up and said, sarcastically, “Thank you, George Bush!”

Of course their refrigerator was of no use under those conditions.

Why did we attack Iraq’s electricity? The architect of the air war, USAF Colonel John Warden, said it gave us “long-term leverage”! He also said, “we hold direct attacks on civilians to be morally reprehensible.” So, he said, we should attack civilians indirectly.

USAF Colonel Kenneth Rizer explained the indirect attacks: “destruction of these [electrical] facilities shut down water purification and sewage treatment plants. As a result, epidemics of gastroenteritis, cholera, and typhoid broke out, leading to perhaps as many as 100,000 civilian deaths.” He concluded this was a smart and legal strategy because it “targeted civilian morale” – but did so “indirectly.”

According to reports in New England Journal of Medicine and UNICEF, Colonel Rizer’s estimate of civilian deaths is ten times too low. But his reasons for the deaths are correct: no electricity means no way to process water or sewage; no way to refrigerate medicine and food; no way to power hospitals or incubators; no way even to communicate needs.

Colonel Warden wrote, “We are struck by the fact that the physical side of the enemy is, in theory, perfectly knowable and predictable. Conversely, the morale side — the human side — is beyond the realm of the predictable in a particular situation because humans are so different from each other.”

But are we really?! How would anyone in any country feel to be denied electricity for years as a tool of coercion? If we can’t imagine ourselves as Iraqis, what will happen?

Almost 40 years ago in his Riverside Church address, Dr. King said, “Each day the war goes on the hatred increases in the heart of the Vietnamese …. It is curious that the Americans, who calculate so carefully on the possibilities of military victory, do not realize that in the process they are incurring deep psychological and political defeat.”

Although we still do not realize it, we laid the groundwork for our defeat in Iraq by bombing Iraq’s electrical plants and re-imposing sanctions in 1991. It was a failure to practice Amos Oz’ advice: to imagine ourselves in the shoes of the other, of the Iraqis.

Economic Warfare: Iraq and the I.M.F.

voices — Mon, 18 Dec 2006 19:52:14 -0600

Excerpt

By Jeff Leys, jeffleys@vcnv.org
Voices for Creative Nonviolence
September 18, 2006

This week, the International Monetary Fund will be holding its annual meeting in Singapore. No doubt, the economic restructuring and forced leveraging of Iraq will be a key component of talks surrounding the meeting. In these past few months, free trade zones have been established along the borders with Syria and Iran; foreign investment laws have been vetted and approved; and laws governing investment in the oil sector have been drafted and introduced. Iraq continues to move forward in implementing conditions imposed upon it through the Stand By Arrangement with the International Monetary Fund (IMF) in December of 2005. While the command economy established under Saddam Hussein’s regime was unsustainable, it is also highly probable that the benefits of the economic restructuring under way at present will accrue to the benefit of an elite segment of Iraq and of the international community. It is improbable that ordinary Iraqi citizens will be the beneficiaries of these changes.

Body

By Jeff Leys, jeffleys@vcnv.org
Voices for Creative Nonviolence
September 18, 2006

The blueprints for this radical restructuring of Iraq’s economy are contained within the parameters of the Stand By Arrangement (S.B.A.) between Iraq and the I.M.F. Implemented in December 2005, this so-called “agreement” was reached between the IMF and Iraq’s transitional government, at the final hour before the first government elected under Iraq’s new constitution assumed office.

The S.B.A. is a condition imposed by the Paris Club [1] when its members opted to reduce their claims of debt against Iraq. Paris Club members claimed some $40 billion in debt against Iraq in December 2003. Other countries and multinational countries claimed some $85 billion in debt against Iraq. This debt was built up under the regime of Saddam Hussein and accrued mostly to the benefit of the regime rather than to the benefit of the Iraqi people as a whole. That is, it was mostly accrued to fund the build up of Hussein’s military, his regime’s internal security apparatus and his regime’s war against Iran rather than to provide for the Common Good in Iraq—schools, health care, jobs, housing, etc.

In December 2004, the Paris Club members determined that they would reduce its claims against Iraq by 30 percent. It further determined that they would reduce their claims against Iraq by an additional 20 percent once Iraq entered into a Stand By Arrangement with the I.M.F. This occurred in December 2004. The Paris Club members further determined they would reduce their claims against Iraq by a final 30 percent when the I.M.F. certifies that Iraq is in full compliance with and completion of the conditions imposed by the I.M.F.

The terms of the I.M.F. arrangement, and its impact upon ordinary Iraqi citizens, is becoming increasingly clear. The economic war against Iraq continues unabated.

Fuel subsidies have steadily declined over this past year, with a concomitant increase in the prices which Iraqi citizens pay for fuel. The I.M.F. requires that the fuel prices paid by Iraqis continue to be increased, as the subsidies are further reduced. By the end of the year, the official price for regular gasoline and diesel fuel is to cost twice as much as it did when the S.B.A. came into effect in December 2005. Kerosene is to cost 4 ½ times as much.

The increase in fuel prices is a driving factor of inflation in Iraq. In June, inflation stood at 58 percent. As noted by the I.M.F.:

“Most of the increase in prices of fuel and electricity, and of the majority of the other inflation components, occurred early n 2006….However, upward pressure on prices appears now to be fanning out to all items….By May 2006, prices of all items were growing in the range of 15 – 30 percent, although fuel and electricity prices were still growing much faster, resulting in a year on year increase of 58 percent.” [2]

Food prices increased by 26.6 percent from May 2005 to May 2006; rent by 37.5%; and transportation / communication by 119.4%. [3]

As fuel and electricity costs escalate, so too do the costs of life’s staples. Without electricity it is not possible to power refrigerators to store food—so the price of ice bars, the alternative to refrigerators, goes up in Anbar province. [4] Increased fuel costs drive up the costs to bring food to market, so food prices increase. Demand for clay jars and jugs increases, along with the price, as people seek other means to store food, given the lack of electricity to power refrigerators. [5]

As Iraqis struggle to make ends meet, spending shifts away from other items. This shift in spending reverberates through the economy, as other trades see the demand for their work and skills decline. Mahmud Tahir is a tailor in Basra whose business, and sustenance for his family, are in decline. He says,

“Three months ago, I used to finish five to seven deshdashahs [Arabic gown for men] every day. Now, I can finish one deshdashah every two days. This makes it very difficult for me to manage my family’s needs. Perhaps the reason behind this recession is that Basra citizens are not paying attention to their clothing, because they are more worried about their every day life and their living problems Obviously, the increase in prices of essential foodstuff such as meat, fish and vegetables has drained all their budgets. Perhaps the reason is that people prefer not to go to the markets for shopping because of the deterioration of the security situation and fear of the unknown.” [6]

The I.M.F. report only barely traces upon this harsh economic reality faced by Iraqi citizens. Indeed the I.M.F. report does not even mention the other side of the coin which afflicts Iraq—unemployment.

At the end of June, 59 percent of Iraq’s labor force capable of gainful employment was unemployed. Of those with work, 31 percent held only temporary or seasonal jobs. The circumstances faced by Iraqi women was infinitely worse. 85 percent of Iraqi women are unemployed. [7]

With inflation and unemployment out of control in Iraq, we can toss out the old Phillips Curve we learned in high school economics. The Phillips Curve hypothesizes that inflation and unemployment move in opposite directions—clearly not the case in Iraq.

Earlier this year, Iraq’s Labour and Social Affairs Ministry released a survey that estimates that 20 percent of Iraqis live below the international poverty line. Layla Kazim, Director of the Ministry’s Social Affairs Office, was cited as saying that 2 million families live below the international poverty line of $1 per day per person residing in the household (as defined by the World Bank) [8], the best the I.M.F. (along with its ally at the World Bank) can do in its plan for Iraq is to further undermine the Public Distribution System and gut the wage and pension law.

Iraq is implementing, at the behest of the I.M.F. and World Bank, a new “social protection program” which will likely ultimately replace the Public Distribution System of food rations established under the sanctions regime. In June the new “social protection program” was covering 430,000 families which earn less than $2 per day. The goal is to cover 1 million families by the end of the year. [9] The Public Distribution System of food rations was created under the sanctions regime to provide a modicum level of sustenance for Iraqis, with most Iraqis depending upon the PDS program. As of June 2004, fully 60% of Iraqis depended entirely upon the PDS program for their daily sustenance. Already the basket make-up of goods provided under the PDS has been significantly reduced. As noted by the I.M.F., Iraq “…intends to reform the more expensive Public Distribution System over the medium term (with the help of the World Bank).” [10]

Curious is the different standards of measurement of the international poverty line being applied in Iraq. Note that the program implemented under the I.M.F. strictures provides relief for families with an income of less than $2 per day. The international standard for absolute poverty, as defined by the World Bank, is $1 per day per person. The I.M.F. imposed plan not only will not provide relief for all Iraqis living in abject poverty, let alone poverty, it will also serve to undermine the Public Distribution System by further placing the social safety net on a purely monetary basis.

The pension law in Iraq is also on the chopping block. In November 2005, Iraq passed a new pension law which was never implemented. This law, if implemented, would permit an employee to retire at age 50 if he / she had 25 years of employment history. The maximum pension would have been 80 percent of the worker’s final salary at the time of retirement. Under the strictures of the I.M.F., Iraq is to “reform” the pension law by the end of September 2006. [11]

It is worth noting that the “Rule of 75” contained in Iraq’s pension law is not so much different from that retirement provision provided for many public sector workers in the U.S. as well as for a few private sector workers with strong unions in the U.S. Under the “Rule of 75” in the U.S., a worker is able to retire with full retirement benefits when the sum of the number of years worked with a specific employer plus her / his age adds up to 75.

It should also be noted that in 2004 the average life expectancy in Iraq was approximately 59 years of age. [12] The World Health Organization estimated in 2004 that the average life expectancy for males was 51 while for females it was 61 (while further estimating that in 2002 the average health life expectancy for males was 48.8 and for females 51.5. [13] Only 4.9% of Iraq’s population in 2004 was 60 years old or older. [14] As in the U.S., the refrain in Iraq, under strictures from the I.M.F. and World Bank, seems to be to cut and shred the social compact between generations of citizens.

As an ominous warning of what may further await Iraqi citizens, the I.M.F. calls for further monetary action to combat the rampant inflation, saying:

“The ongoing insurgency and shortages of goods, as well as supply disruptions generally in the non-oil economy, will continue to put upward pressure on prices. But it remains important that the C.B.I. [Central Bank of Iraq] take decisive measures to contain it before inflationary expectations become entrenched, either by an effective tightening of monetary conditions and / or by exchange rate action. The C.B.I. will need to tighten monetary conditions further if inflation does not start to come down soon. The government can help by keeping public sector wages and pensions in line with the absorptive capacity of the small, albeit growing, non-oil economy, and by making every effort to prevent supply bottlenecks (especially in the petroleum product market) from destabilizing prices further.” [15]

In other words: cut pensions of retirees; limit the wages of public employees; take no action to combat unemployment through public works and other projects; “liberalize” the law to drop all barriers to the private import of gasoline (an already accomplished action); and exercise “fiscal discipline” at all costs.

Indeed, the I.M.F. tips its hand on the potential use of monetary policy to advance its objectives in Iraq when it writes that: “The monetary transmission mechanism, however, is weak. The effectiveness of interest rate changes in influencing inflation is thus very limited. Economic activity is dominated by cash transactions, and the banking system is largely inert. Few loans are extended and the deposit base is not very active. Raising interest rates will nonetheless signal the authorities determination to deal with inflation.” [16]

Iraq’s Central Bank and government is not able to influence the economy through manipulations of the money supply through, for example, changes in interest rates. Given the lack of a fully developed tax structure in Iraq, the government also cannot manipulate tax rates to impact upon the economy. Because of these two key factors, the only recourse left to Iraq’s government is to attempt to manipulate the economy through budgetary measures. The I.M.F. strictures are that Iraq must exercise “fiscal discipline” at all costs. Imagine the tremendous difficulty, if not impossibility, of breaking out of recessions and depressions in the U.S. if the government was forced to exercise “fiscal discipline” at all costs—never being permitted to spend on the Civilian Conservation Corps, the Works Progress Administration, the Tennessee Valley Authority or the Boulder / Hoover Dam project during the Great Depression.

Despite the fact that Iraq operated with a surplus in 2005 (mainly due to a lower than anticipated level of government investment), the I.M.F. is requiring Iraq to operate strictly within its budget for 2006. As noted by the I.M.F., “The determination to contain recurrent spending, and particularly wages and pensions, to the original budget allocations, is an important signal of the government’s respect for fiscal discipline.” [17]

Indeed, the I.M.F. notes with approval that Iraq is “…committed to resist calls for an increase in the wage bill (from additional hiring), and will resist the practice of granting large Eid bonuses.” [18] (Eid al-Fitr and Eid al-Adha are religious celebrations). That is, there will be no additional hiring of the unemployed (no Civilian Conservation Corps of Great Depression era United States) and an actual cutting of income by the elimination of holiday wage bonuses.

The I.M.F. seems to be conceding that monetary policy will not be useful in combating inflation in Iraq. At the same time, it is removing fiscal policy as a tool to address unemployment by not allowing Iraq to exceed allocations in its 2006 budget. The U.S. saw a version of this happening in the 1970’s and through the Reagan Depression when both inflation and unemployment were high, though not nearly to the levels of unemployment seen in Iraq. We had a word for it then—stagflation. And wage-and-price control efforts did little to correct the underlying economic malaise of the country. Why should it be expected that wage controls in Iraq would serve any useful purpose at this time?

All of this brings us back to the issue of the odious debt incurred by Saddam Hussein’s regime in the 1980’s. It is this debt which creates the economic leverage of the international community—led by the U.S. and its allies in the Paris Club—to force the economic restructuring of Iraq. While the debt claimed against Iraq is now reduced by 50%, Iraq must comply with the strictures of the I.M.F. before the claims are reduced by an additional 20%.

The third stage of debt claim reduction should take place in 2008, but only if Iraq complies with the strictures of the I.M.F. If Iraq acquiesces and complies, the outstanding debt claimed against Iraq will be reduced from $53.4 billion to $29.5 billion. Repayment of debt claims is not being required until 2011, though interest will continue to accrue and be capitalized prior to the start of repayment. As a result in 2010, debt claimed against Iraq will be $59 billion without compliance with the I.M.F. strictures or $33.7 billion with compliance with the I.M.F. strictures. This does not include the $32 billion in outstanding war reparations charges imposed against Iraq by the U.N. following Hussein’s invasion and occupation of Iraq in 1990-91. When combined, Iraq will be paying at least $5.9 billion per year as debt claims repayment and war reparations payments.

The question is: how much longer will the international community be permitted to punish the Iraqi people?

While much work must be done to secure the end of the military occupation of Iraq, we who oppose this war must not lose sight of the economic warfare which is being waged against the Iraqi people. We must demand not only an end to the military occupation and withdrawal of all military forces from Iraq, we must also demand the unconditional cancellation of all the odious debt incurred by Saddam Hussein’s regime. Such an unconditional cancellation of necessity means that all of the conditions being imposed against Iraq by the I.M.F. must be cancelled. Only in this way might the Iraqi people have any chance at owning their own country.

ENDNOTES

1 The 19 permanent members of the Paris Club are: Austria, Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Netherlands, Norway, Russian Federation, Spain, Sweden, Switzerland, United Kingdom, and United States.

2 “First and Second Reviews Under the Stand-By Arrangement”, International Monetary Fund, July 17, 2006, p. 5, Box 1.

3 International Monetary Fund, p. 5.

4 Al-Adalah, June 7, 2006, p. 4

5 Al-Mashriq, July 15, 2006, p. 5

6 Al-Mada, June 26, 2006, citing “Deterioration in Security Situation in Basra Leads to Economic Recession”, BBB International Reports, June 20, 2006

7 Kazem al-Atabi, “Iraqis risk their lives looking for or traveling to work”, Dpa, June 23, 2006

8 “One-fifth Iraqi population below poverty line and 85 percent of Iraqi women are unemployed”, BBC International Reports (Middle East), July 11, 2006 as reported by Al-Mashriq, July 22, 2006

9 I.M.F., page 8

10 I.M.F., p. 8, footnote 8

11 I.M.F., p. 7

12 UNICEF Country Reports,

13 World Health Organization, Country Reports,

14 Ministry of Planning and Development Cooperation, “Iraq Living Conditions Survey 2004, Volume 1: Tabulation Report”, p. 17

15 I.M.F., page 13, emphasis added

16 I.M.F., p. 8

17 I.M.F., page 12, emphasis added

18 I.M.F., page 6

VCNV Author

Jeff Leys

The West, Quietly, is Pillaging Iraq

voices — Sun, 17 Dec 2006 13:23:16 -0600

Excerpt

When Saddam Hussein grabbed power in 1979, Iraq had no long-term foreign debt. Cash reserves were $36 billion. Iraq had high literacy and public universities; it had extensive socialized health care. It was becoming a “first world” nation.

Soon, however, this violent, cunning despot began squandering that wealth. Borrowing tens of billions of dollars, he built up a vast military and security apparatus. In 1980 - with the United States’ blessing - Saddam invaded his neighbor, the Ayatollah Khomeini’s oil-rich Iran. To Saddam’s utter surprise, that war wasn’t over in a few weeks. It became an eight-year long quagmire. Hundreds of thousands on each side were maimed and killed.

Body

The Iran/Iraq war (1980-88) severely weakened these two nations. The world’s power brokers could endure the suffering. With their military aid (to both sides) they kept the pot boiling. And those power brokers could endure Saddam using their toxic chemicals and other weapons to terrorize “his own people.” Saddam’s regime extirpated domestic dissent, killing tens of thousands of Iraqis — mostly Kurds and Shiites.

In 1990, after his invasion of Kuwait, Saddam finally became an international pariah. That set the stage for the First Gulf War and for 13 years of murderous U.N./U.S. sanctions against the Iraqi people. By 2003 no one in the world owed more money than Saddam Hussein. Yet Saddam’s total debt is unknown. Jubilee Iraq cites, among others, the IMF’s estimate of $125 billion.

Saddam’s creditors - the United States, France, Russia, England, Japan, Saudi Arabia, etc. - had no illusions. They knew how Saddam was using their money. After all, as with many international loans, much of the money was spent in the lender’s own country.

In 2003, the United States invaded Iraq and deposed Saddam. Most Iraqis were greatly relieved. But even apart from the ensuing occupation, their ordeal - their captivity - was far from over. Saddam’s creditors, Saddam’s former allies, have forced Iraqis to pay billions annually in debt service. If the United States and other world powers have their way, the Iraqis will keep being bled dry - and having their oil hijacked - paying off Saddam’s loans for decades to come.

In an interesting wrinkle, the United States is simultaneously seeking to have some loans “forgiven.” The United States isn’t being altruistic; the price would be more IMF “reforms” and “privatization.” “In exchange [for some debt forgiveness], Iraq will surrender its economic sovereignty to global financial institutions, provide foreign investors greater access to Iraqi natural resources, and increase investment opportunities for multinational corporations.” [Brian Dominick, “New Standard”]

But this all too familiar scenario isn’t inevitable. Grassroots activists and economists, especially in Canada and England, have a compelling tool: the doctrine of “odious debt.” This doctrine states that “when creditors lend to a dictatorial regime which they know is not using the loans to benefit the population, then debt payments cannot be demanded of those people once they are free.” [Justin Alexander, Jubilee Iraq]

Odious debt is no novelty; it goes back to 1898. At the end of the Spanish-American War, the United States applied the doctrine by refusing to enforce payment of Cuba’s odious debt to its former colonial master, Spain. The ruling nations and their international banks lend money to the tyrants (Mobutu of Zaire, Duvalier of Haiti, Marcos of the Philippines, and so on) who serve them well. Odious debt is not a doctrine these creditors want to hear.

Exceedingly rare would be the Iraqi who felt obliged to take on Saddam’s debt. Nor do Iraqis want the IMF or the G-8/Paris Club creditor nations to sort out Saddam’s debts behind closed doors.

What Iraqis want is a transparent, international tribunal - one the creditors don’t control. That tribunal would adjudicate every outstanding documentable loan. It would determine whether the loan was odious (and therefore invalid) or whether it was designed to benefit the Iraqi people (thereby legitimizing it).

According to Justin Alexander, the tribunal “would dramatically reduce Iraq’s debt, set a clear precedent for other countries which have inherited debt from dictators and discourage creditors from financing the Saddams of the future.” It would eliminate debt without attaching IMF strings.

Ed Kinane is a human rights activist who spent five months in Iraq in 2003. Email to: edkinane@a-znet.com

VCNV Author

Ed Kinane

Crude Designs: The Rip-Off of Iraq’s Oil Wealth

voices — Sun, 17 Dec 2006 05:11:49 -0600

Excerpt

By Greg Muttitt, November 2005
(Published by PLATFORM with Global Policy Forum, Institute for Policy Studies, New Economics Foundation, Oil Change International, and War on Want)

Read the full report

Executive Summary

While the Iraqi people struggle to define their future amid political chaos and violence, the fate of their most valuable economic asset, oil, is being decided behind closed doors.

This report reveals how an oil policy with origins in the US State Department is on course to be adopted in Iraq, soon after the December elections, with no public debate and at enormous potential cost. The policy allocates the majority (1) of Iraq’s oilfields – accounting for at least 64% of the country’s oil reserves – for development by multinational oil companies.

Body

By Greg Muttitt, November 2005
(Published by PLATFORM with Global Policy Forum, Institute for Policy Studies, New Economics Foundation, Oil Change International, and War on Want)

Read the full report

Executive Summary

While the Iraqi people struggle to define their future amid political chaos and violence, the fate of their most valuable economic asset, oil, is being decided behind closed doors.

This report reveals how an oil policy with origins in the US State Department is on course to be adopted in Iraq, soon after the December elections, with no public debate and at enormous potential cost. The policy allocates the majority ¹ of Iraq’s oilfields – accounting for at least 64% of the country’s oil reserves – for development by multinational oil companies.

Iraqi public opinion is strongly opposed to handing control over oil development to foreign companies. But with the active involvement of the US and British governments a group of powerful Iraqi politicians and technocrats is pushing for a system of long term contracts with foreign oil companies which will be beyond the reach of Iraqi courts, public scrutiny or democratic control.

COSTING IRAQ BILLIONS

Economic projections published here for the first time show that the model of oil development that is being proposed will cost Iraq hundreds of billions of dollars in lost revenue, while providing foreign companies with enormous profits.

Our key findings are:

At an oil price of $40 per barrel, Iraq stands to lose between $74 billion and $194 billion over the lifetime of the proposed contracts ², from only the first 12 oilfields to be developed. These estimates, based on conservative assumptions, represent between two and seven times the current Iraqi government budget.
Under the likely terms of the contracts, oil company rates of return from investing in Iraq would range from 42% to 162%, far in excess of usual industry minimum target of around 12% return on investment.

A CONTRACTUAL RIP-OFF

The debate over oil “privatisation” in Iraq has often been misleading due to the technical nature of the term, which refers to legal ownership of oil reserves. This has allowed governments and companies to deny that “privatisation” is taking place. Meanwhile, important practical questions, of public versus private control over oil development and revenues, have not been addressed.

The development model being promoted in Iraq, and supported by key figures in the Oil Ministry, is based on contracts known as production sharing agreements (PSAs), which have existed in the oil industry since the late 1960s. Oil experts agree that their purpose is largely political: technically they keep legal ownership of oil reserves in state hands ³, while practically delivering oil companies the same results as the concession agreements they replaced.

Running to hundreds of pages of complex legal and financial language and generally subject to commercial confidentiality provisions, PSAs are effectively immune from public scrutiny and lock governments into economic terms that cannot be altered for decades.

In Iraq’s case, these contracts could be signed while the government is new and weak, the security situation dire, and the country still under military occupation. As such the terms are likely to be highly unfavourable, but could persist for up to 40 years.

Furthermore, PSAs generally exempt foreign oil companies from any new laws that might affect their profits. And the contracts often stipulate that disputes are heard not in the country’s own courts but in international investment tribunals, which make their decisions on commercial grounds and do not consider the national interest or other national laws. Iraq could be surrendering its democracy as soon as it achieves it.

POLICY DELIVERED FROM AMERICA TO IRAQ

Production sharing agreements have been heavily promoted by oil companies and by the US Administration.

The use of PSAs in Iraq was proposed by the Future of Iraq project, the US State Department’s planning mechanism, prior to the 2003 invasion. These proposals were subsequently developed by the Coalition Provisional Authority, by the Iraq Interim Government and by the current Transitional Government. The Iraqi Constitution also opens the door to foreign companies, albeit in legally vague terms.

Of course, what ultimately happens will depend on the outcome of the elections, on the broader political and security situation and on negotiations with oil companies. However, the pressure for Iraq to adopt PSAs is substantial. The current government is fast-tracking the process and is already negotiating contracts with oil companies in parallel with the constitutional process, elections and passage of a Petroleum Law.

The Constitution also suggests a decentralisation of authority over oil contracts, from the national level to Iraq’s regions. If implemented, the regions would have weaker bargaining power than a national government, leading to poorer terms for Iraq in any deal with oil companies.

A RADICAL DEPARTURE

In order to make their case, oil companies and their supporters argue that PSAs are standard practice in the oil industry and that Iraq has no other option to finance oil development. Neither of these assertions is true.

According to International Energy Agency figures, PSAs are only used in respect of about 12% of world oil reserves, in countries where oilfields are small (and often offshore), production costs are high, and exploration prospects are uncertain. None of these conditions applies to Iraq.

None of the top oil producers in the Middle East uses PSAs. Some governments that have signed them regret doing so. In Russia, where political upheaval was followed by rapid opening up to the private sector in the 1990s, PSAs have cost the state billions of dollars, making it unlikely that any more will be signed. The parallel with Iraq’s current transition is obvious.

The advocates of PSAs also claim that obtaining investment from foreign companies through these types of contracts would save the government up to $2.5 billion a year, freeing up funds for other public spending. Although this is true, the investment by oil companies now would be massively offset by the loss of state revenues later.

Our calculations show that were the Iraqi government to use PSAs, its cost of capital would be between 75% and 119%. At this cost, the advantages referred to are simply not worth it.

Iraq has a range of less damaging and expensive options for generating investment in its oil sector. These include: financing oil development through government budgetary expenditure (as is currently the case), using future oil flows as collateral to borrow money, or using international oil companies through shorter-term, less restrictive and less lucrative contracts than PSAs ⁴.

IN WHOSE INTERESTS?

PSAs represent a radical redesign of Iraq’s oil industry, wrenching it from public into private hands. The strategic drivers for this are the US/UK push for “energy security” in a constrained market and the multinational oil companies’ need to “book” new reserves to secure future growth.

Despite their disadvantages to the Iraqi economy and democracy, they are being introduced in Iraq without public debate.

It is up to the Iraqi people to decide the terms for the development of their oil resources. We hope that this report will help explain the likely consequences of decisions being made in secret on their behalf.

Notes

The Iraqi government would be left with control of only the 17 fields that are already in production, out of around 80 known fields.
2. The precise terms of proposed contracts are obviously be subject to negotiation: our projections are based on a range of terms used in the most comparable countries, including Libya, which is commonly viewed as having some of the most stringent in the world. Multinational oil companies are pushing for lucrative terms by international standards, based on Iraq’s high level of political and security risk. These risks place the Iraqi government in an extremely weak negotiating position. The projections are given in undiscounted real terms (2006 prices). The contract duration is assumed to be 30 years as 25-40 years is the common length. The (2006) net present value of the loss to Iraq amounts to between $16 billion and $43 billion at 12% discount rate.
The terminology of PSAs labels the private companies as “contractors”. This report illustrates that this label is misleading because PSAs give companies control over oil development and access to extensive profits.
These might include buyback contracts, risk service contracts or development and production contracts

An Analyis of Iraq's Odious Debt

voices — Sat, 16 Dec 2006 16:06:34 -0600

Excerpt

Written by Justin Alexander of Jubilee Iraq
September 2005

Debt - Introduction

Iraq has an outstanding debt load of around $115bn (reduced this year from around $125bn in the first trance of Paris Club relief) on top of $33bn of unpaid war reparations. This means that the ratio of debt and reparations to export earnings is around 750%, way beyond the IMF’s recommended maximum ratio of 162%. The Paris Club, which holds $42bn, about a quarter of the total debt and reparations, agreed in November 2004 to reduce their claims by 80% in three trances linked to economic conditionalities. The US is topping this up to 100% relief but no other countries have followed suit. Even if all creditors match the Paris Club terms, and this looks far from certain, Iraq will still be left with $25bn debt along with the $33bn reparations. Additionally there is a very large reparations claim from Iran, although this has little international backing.

Body

Written by Justin Alexander of Jubilee Iraq
September 2005

Debt - Introduction

Aside from the ongoing internal conflict, these claims are arguably the greatest threat to Iraq’s future. As Clare Short, the then UK Minister for International Development, said on the day after Baghdad fell: “The level of debt and claimed reparation payments is so great that they could lock a naturally wealthy economy into an inability to recover.” The threat is not merely the attrition of the Iraqi budget but also the undermining of Iraq’s ability for self-determination and the resentment of Iraqis to the creditors countries and to their own government for diverting precious resources to service what they see as the personal debts of the Saddam regime.

The affect on the budget is already noticeable in reparations payments alone, even without debt payments (there is a moratorium on payments until 2006, extended to 2008 for the Paris Club portion of the debt). In the 2 years since the fall of Saddam, Iraq has paid $2.4bn in reparations, more than the combined annual health and education budget of $1.5bn in 2004. Reparation service is fixed at 5% of oil revenues by UNSCR 1483 while demands for debt service in 2006 could range from $2-5bn. Even without these demands the Iraqi budget would be expected to run a deficit in the coming years.

The reason Iraq went from a position of zero-debt (and $36bn cash reserves) in 1979 to $125bn debt in 2003 was because of the vast expenditure on the Iran-Iraq war ($120bn in the just first 4 years) together with a distribution of oil exports by that war (just $48bn in those same first 4 years). The difference was made up by foreign loans and grants (there is an ongoing dispute over whether payments from the GCC countries was structured as loans or grants provided out of fear of the Iranian revolution spreading).

Odiousness

There has been unusually broad-based international support for the argument that the debt is “odious” -a doctrine in international law dating back to the 1920s which states that loans made with open eyes to totalitarian regimes that spend the money against the interest of the people, for example on warfare, internal repression and corruption, are not valid state debts. Paul Bremer stated: “[the debt is] a result of Saddam’s economic incompetence and aggressive wars,” while his CPA economic advisor (now Polish Prime Minister) Marek Belka quantified this: “about 90% of Iraq’s virtual debt is war-related.” The Jubilee Iraq campaign (www.jubileeiraq.org), an alliance of Iraqi economists and lawyers with international debt campaigners, has garnered support for a proposed arbitration tribunal on odious debt from parliamentarians in many countries, including bills in the US Congress (supported by 31 Representatives including senior members of both parties) and the British Parliament (support from over 100 MPs).

Iraqis from across the political spectrum argue the case forcefully, for example PUK representative Perweez Mohammed has said: “The creditors cooperation enabled Saddam to presiding over atrocities such as Halabja and mass graves. Saddam never spent money for the benefit of the Iraqi people, but just for himself and his followers.” While interim Prime Minister, Iyad Allawi wrote in the Independent: “The vast majority is “odious” debt, used to build up the war machine of the ousted regime, largely through arms purchases supported by the lending countries.” And Ayatollah al-Hakim announced: “The creditors committed an act of oppression against the people of Iraq by providing Saddam’s regime with these funds. There is no question about the odious nature of these debts”. The clearest expression of Iraqi feeling on this issue was a resolution passed unanimously by the Interim National Assembly on 30 November in response to the Paris Club agreement, states: “This debt is odious and is not the Iraqi people debt. It must be cancelled immediately, completely and unconditionally.” Criticising the Paris Club deal for being phased over 3 years, partial and conditional. The Assembly’s Resolution, threatening immediate repudiation of the debt unless the creditors offered a better deal, was never implemented because of the elections and then wrangles over the formation of the transitional government (in fact some commentators have suggested the Paris Club agreement was deliberately rushed through at the end of 2004 because of the scheduled elections).

Some creditors argue that if Iraq pushes the argument that the debt is odious further this will undermine its chances of future loans and investment. However many in the finance community disagree with this. A Wall Street Journal editorial read: “We wouldn’t blame Iraq’s leaders if they decided that some of those financial obligations are indeed odious. And given that this is such an extreme case, international lenders probably wouldn’t hold it against them for long.” Even East-West Debt, an Antwerp-based debt collection firm, admitted “Stiffing the holders of the original loans may not impede Baghdad’s ability to get new loans.” A one-off repudiation of debt on the clear criteria of odiousness does not phase commercial lenders, and a country with little overhanging debt clearly has a far better credit rating than Iraq today with the world’s highest debt/export ratio.

Conditions on Debt Relief

As the National Assembly resolution made clear, Iraqis are not merely concerned about repayment of debt they consider odious, but also with conditions attached to debt relief. For the Gulf countries the conditions are likely to be a complex web of political horse-trading, as yet unnegotiated. For the Paris Club the conditions are economic policies which will be fully articulated in the IMF Standby-Agreement expected to be announced in September. Already the IMF has been meeting with Iraq, giving an overview of its priorities in September last year, when it demanded: “the implementation of key structural reforms to transform Iraq into a market economy.. in which progress must be made in 2005… including tax reform, financial sector reform and restructuring of state-owned enterprises.” A key demand is the phasing out of subsidies on fuel (initially by $1bn a year) and the end of the food ration has also been discussed. The concern about these IMF conditions are twofold. Firstly they may be socially and economically damaging. The IMF itself has admitted a degree of failure in Argentina which essentially ceded control of its economy to the IMF through the 90s because of its vast debt (which incidentally was largely accumulated by the military government and many consider to be odious) leading up to the economic crisis in 2002. Secondly, even if the IMF does recommend the optimal economy policies, Iraqis are unhappy with ceding control over their economy just as they begin on the promised path towards democracy and self-determination.

Professor Joseph Stigitz, the Nobel Prize former chief-economist of the the World Bank, recently spoke at debate on Iraq at Columbia University. He gave the example of the IMF’s policies in Russia in the 1990s, in which the communist economy was rapidly replaced by a liberalized and privatized one, causing the GDP to fall by 50% and the poverty level to rise from 2% to between 20-40%. This strategy, which he says is precisely what the US and IMF are applying to Iraq “has almost an unfailing history of failure.” Elsewhere Stiglitz wrote “In theory, the IMF supports democratic institutions in the nations it assists. In practice, it undermines the democratic process by imposing policies.” This is echoed by Iraqi economist Salih Yasir: “IMF conditions neglect the social consequences of economic policies. An IMF structural adjustment program would create more social tension and cause a social explosion which might destroy the transition to democracy.” Weshah Razzak, an Iraqi exile working as a senior economist for the New Zealand government wrote: “When I look at past IMF policy errors I get frightened. Iraq stands no chance of success if the IMF makes policies like those it made in the past.”

Reparations

Historians generally agree that the reparations imposed on Germany after the 1st World War contributed significantly to the economic crisis which propelled Hitler to power. After the 2nd World War and most major conflicts since then the international community has taken a different approach and not pressed large reparations on the losers in conflicts. The UN Compensation Commission, established in 1991, was an exception to this general rule. After 14 years of deliberation it completed is assessment of the $368bn of claims, awarding a total of $52bn of which $19bn has been paid to date.

Iraqis have long complained that they were not allow sufficient representation at UNCC meetings, and that as a result incorrect and excessive awards have been made. This was backed up on 9 January 2005 when the UN Office of Internal Oversight Services released its assessment of the UNCC, suggesting that Iraq may have overpaid by around $5bn (a quarter of the amount paid to date). The Independent Inquiry Committee into the UN Oil-for-Food gave this account: “The IAD also raised significant issues about claims processing and claims decisions at the UNCC, which, in OIOS’ view, resulted in significant overpayments to claimants… Many very large potential overpayments were identified… including double compensation, currency exchange errors, and calculation errors.”

Since the fall of Saddam, Iraqis have also been arguing a stronger case that, as fellow victims of that regime, they should not be held responsible for any reparations payments. The Youth Democracy Organization, representing Baghdad students, wrote: “When the Ba’athist regime invaded Kuwait, we Iraqis were as much victims as the Kuwaitis. Where is the international commission providing compensation for us?” At the final UNCC session on 28-30th June 2005 the Iraqi Deputy Foreign Minister Mohammed Hamud Bidan requested that ” we stop the payments of 5% from oil revenues…it is too much for us. We think it is time now to stop and leave Iraq to negotiate directly with the states concerned.”

Suggested Action Points:

1) Encourage all creditors to match the Paris Club’s 80% and ideally go beyond this.

2) Request the Paris Club to delink debt-relief from IMF conditionality.

3) Establish a UN team to investigate the possibility of an odious debt tribunal do determine fairly when of the debt claims are legitimate and which are odious.

4) In a new UN SCR end the requirement for 5% of oil revenues to go to reparations and leave Iraq to negotiate bilaterally with claimant countries and/or request for the UNCC to reassess the outstanding awards in the light of claims of overstatement.

ODIOUS DEBT, ODIOUS ALLIES: Pillaging Iraq

Ed Kinane — Thu, 15 Dec 2005 22:06:05 -0600

Excerpt

They are asking us to pay for the knives

they gave Saddam to slaughter us.

— Dr. Hasim al Hassani, Iraqi Islamic Party

When Saddam Hussein grabbed power in 1979, Iraq had no long-term debt. Its cash reserves were $36 billion. It had high literacy and public universities; it had extensive socialized health care. Iraq was becoming a “first world” nation.

During the 1980’s, however, as a US ally, Saddam squandered that wealth. Borrowing tens of billions of dollars, he built up a vast military and security apparatus.

Body

They are asking us to pay for the knives

they gave Saddam to slaughter us.

— Dr. Hasim al Hassani, Iraqi Islamic Party

During the 1980’s, however, as a US ally, Saddam squandered that wealth. Borrowing tens of billions of dollars, he built up a vast military and security apparatus.

A violent, cunning despot, Saddam invaded neighboring Iran, a US enemy. (Like Iraq, Iran is enticing: it has vast reserves of oil.) By 2003, no one in the world owed more money than Saddam Hussein.

Saddam’s total debt is unknown. The Jubilee Iraq website cites, among others, the IMF estimate of $125 billion. But this excludes, for example, over $30 billion in remaining Kuwaiti reparation claims, plus Iranian and Iraqi-Jewish claims totaling nearly $200 billion.

Saddam’s creditors — US, France, Russia, England, Japan, Saudi Arabia, etc. — had no illusions. They knew how Saddam was using the money. After all, as with many international loans, much of the money was spent in the creditor’s country. Weapons exporters didn’t complain. Anyway, Khomeini’s Iran had few friends.

The Iran/Iraq war (1980-88) cost a million casualties. But, conveniently, it helped neutralize both Iran and Iraq. The world’s power brokers didn’t mind. Their military aid kept the pot boiling.

And it was just fine that Saddam used their toxic chemicals and other weapons to terrorize “his own people.” Saddam’s regime extirpated domestic dissent, killing tens of thousands of Iraqis — mostly Kurds and Shiites.

In 1990, after his invasion of Kuwait (with its vast oil reserves), Saddam finally became an international pariah. That set the stage for the First Gulf War and for 13 years of murderous UN/US sanctions against the Iraqi people.

In 2003 the US invaded Iraq and deposed Saddam. Most Iraqis were greatly relieved. Not only had they not elected Saddam, but those sanctions he provoked led to hundreds of thousands of premature deaths.

Odious debt

“The doctrine of odious debt states that when creditors lend to a dictatorial regime which they know is not using the loans to benefit the population, then debt payments cannot be demanded of those people once they are free.”

—Justin Alexander, Jubilee Iraq

This is no esoteric doctrine. The US applied the same doctrine when, in the wake of the Spanish-American War, it refused to honor Cuba’s odious debt to its former colonial master, Spain.

We hear little about odious debt from the ruling nations and their international banks. Since such nations and banks have readily and knowingly lent money to tyrants (Mobutu of Zaire, Duvalier of Haiti, Marcos of the Philippines, and so on), it’s not a doctrine they seek to publicize.

If the US and other world powers have their way, the Iraqis will be bled dry — and their oil drained — paying for Saddam’s loans for years to come. Saddam’s creditors, Saddam’s 1980s allies, are also putting the screws on the Iraqi people to pay billions in debt service. Thanks to the current illegal occupation of their country, the gun is literally at their head.

In its magnanimity the US is simultaneously seeking to have some of those loans “forgiven.” But at a price. One commentator points out: “In exchange, Iraq will surrender its economic sovereignty to global financial institutions, provide foreign investors greater access to Iraqi natural resources, and increase investment opportunities for multinational corporations.” IMF structural adjustment with a vengeance.

Generalizations about Iraqis are slippery. But rare is the Iraqi who would feel obliged to take on Saddam’s debt. Nor do Iraqis want the IMF or the G-8/Paris Club creditor nations to sort out Saddam’s debts behind closed doors. What Iraqis want is for a transparent, international tribunal to adjudicate each of Saddam’s loans — a tribunal with input from creditors, but not controlled by them. That tribunal would determine whether any given loan benefited the Iraqi people (thereby legitimizing it) or whether it was odious (and need not be repaid).

With such a tribunal, some of Saddam’s IOUs may remain secret and therefore in oblivion. Creditors may not want their loans exposed for the slimy transactions that they were. According to Justin Alexander, a tribunal “would dramatically reduce Iraq’s debt, set a clear precedent for other countries which have inherited debt from dictators and discourage creditors from financing the Saddams of the future.”

The occupation won’t truly end when our troops are withdrawn. It will end when the invader finances the re-building of the nation it destroyed…and when Iraq’s odious debt is abolished.

_Ed Kinane, based in Syracuse, spent five months in Baghdad with Voices in 2003. Reach him at .

VCNV Author

Ed Kinane

War Reparations & Iraq: Questions & Answers

voices — Thu, 15 Sep 2005 21:15:54 -0500

Excerpt

Who Established the War Reparations Claims Process?

In April 1991, the United Nations Security Council passed Resolution 687. This Resolution established the legal foundation to file, examine, determine and impose war reparations claims against Iraq. These claims arise from the invasion and occupation of Kuwait by Saddam Hussein’s regime in 1990-1991. Resolution 687 established the foundation for creating a fund out of which to pay for war reparations claims and for creating the United Nations Compensation Commission (U.N.C.C.).

Resolution 687 states that:

“Iraq…is liable under international law for any direct loss, damage, including environmental damage and the depletion of natural resources, or injury to foreign governments, nationals and corporations as a result of Iraq’s unlawful invasion and occupation of Kuwait.”

Body

September 2005

Who Established the War Reparations Claims Process?

Resolution 687 states that:

Resolution 687 also established and affirmed the legal foundation requiring Iraq to repay all debts incurred by Hussein’s regime, stating that:

“…all Iraqi statements made since 2 August 1990 repudiating its foreign debt are null and void, and demands that Iraq adhere scrupulously to all of its obligations concerning servicing and repayment of its foreign debt.”

Therefore, in order to address the related economic issues of war reparations and cancellation of the odious debt incurred by Hussein’s regime, Resolution 687 must be rescinded.

What Types of War Reparations Claims Are Filed?

The United Nations Compensation Commission created five main categories of claims. The categories include a broad range of claim types and compensation amounts. It includes such categories as, for example, individual claims capped at a maximum award of $2500; individual claims for losses of over $100,000; claims from international organizations and governments for expenses incurred while evacuating citizens; multi-billion dollar claims filed by Kuwait’s oil-sector for loss of revenue and oil resources; and multi-billion dollar claims for damage to the environment.

The U.N.C.C. describes the five categories of claims on its website (see: www2.unog.ch/uncc/claims/

“Category A claims are claims submitted by individuals who had to depart from Kuwait or Iraq between the date of Iraq’s invasion of Kuwait on 2 August 1990 and the date of the cease-fire, 2 March 1991. Compensation for successful claims in this category was set by the Governing Council at the fixed sum of US $2,500 for individual claimants and US $5,000 for families. However, where a claimant who had filed claims in category “A” only, he or she was eligible to receive a maximum category “A” payment of US $4,000 for individuals and US $8,000 for families.”

“Category “B” claims are claims submitted by individuals who suffered serious personal injury or whose spouse, child or parent died as a result of Iraq’s invasion and occupation of Kuwait. Compensation for successful claims in this category was set at US $2,500 for individuals and up to US $10,000 for families.”

“Category “C” claims are individual claims for damages up to US $100,000 each. Category “C” claims can be made for twenty-one different types of losses, including those relating to departure from Kuwait or Iraq; personal injury; mental pain and anguish; loss of personal property; loss of bank accounts, stocks and other securities; loss of income; loss of real property; and individual business losses.”

“Category “D” claims are individual claims for damages above US $100,000 each. The types of losses that can be claimed under category “D” are similar to those under category “C”, with the most frequent being the loss of personal property; the loss of real property; the loss of income and business-related losses.”

“Category “E” claims are claims of corporations, other private legal entities and public sector enterprises. They include claims for: construction or other contract losses; losses from the non-payment for goods or services; losses relating to the destruction or seizure of business assets; loss of profits; and oil sector losses.”

“Category “F” claims are claims filed by Governments and international organizations for losses incurred in evacuating citizens; providing relief to citizens; damage to diplomatic premises and loss of, and damage to, other government property; and damage to the environment.”

Who Determines What War Reparations Claims to Be Imposed Against Iraq?

The United Nations Compensation Commission was established to receive, study and make final determinations concerning war reparations claims filed against Iraq. The U.N.C.C. Governing Council consists of representatives from the 15 member countries of the U.N. Security Council. Therefore, the United States, Great Britain, France, Russia and China are permanent members of the U.N.C.C.’s Governing Council since each is a permanent member of the U.N. Security Council. The other 10 members of the Governing Council change as the terms and membership of the U.N. Security Council changes.

What War Reparations Have Been Imposed Against Iraq?

The U.N.C.C. imposed a total of $53 billion in war reparations charges against Iraq. It concluded considering files and imposing charges at its June 2005 meeting. Iraq has paid $19 billion of these imposed reparations charges.

Less than 23 percent ($11.664 billion) of the imposed reparations charges arose from claims filed by individuals who suffered losses as a result of the Hussein regime invasion and occupation of Iraq (category A, B, C and D claims). Virtually all of the imposed charges for individual claims have been paid by Iraq.

The overwhelming majority of imposed reparations charges go to Kuwait’s oil sector (which is state owned) and to Kuwait’s government. The U.N.C.C. awarded Kuwait’s oil sector $21.5 billion and Kuwait’s government $8.2 billion. The U.N.C.C. also awarded Kuwait an additional $3.8 billion for claims arising from environmental damage.

In total, Kuwait is receiving $37 billion of the $52 billion in war reparations claims so far imposed against Iraq for the actions of Hussein’s regime.

Who Has Been Paid War Reparations Claims Payments So Far—And Which Are Yet to Be Paid?

Most individual claims are already paid in pull. Of the $11.6 billion in individual war reparations claims imposed against Iraq, only $682 million remains to be paid—of which $665 million is to be paid for claims of over $100,000. There is merit in these claims being paid as they relate to losses suffered by individuals and their families.

Virtually all of the unpaid war reparations claims are owed to Kuwait and its state owned oil enterprise. Kuwait is scheduled to receive $31 billion in imposed war reparations claims. Kuwait’s state owned oil sector is to receive $20.7 billion and the Kuwait government is to receive $6.1 billion in government claims and over $3 billion in environmental damage claims.

How Were and Are War Reparations Payments Funded?

War reparations payments are funded solely by the revenue from the sale of Iraqi oil and are a requirement of various U.N. Security Council Resolution. During the era of economic sanctions, 30% of Iraq’s oil revenue was deposited into the U.N. Compensation Fund (a percentage reduced to 25% in 2000). In May 2003, the percentage was reduced to 5% of Iraq’s oil revenue.

U.N. Security Council Resolution 705 (passed in August 1991) required that 30% of Iraq’s oil revenue be placed into the United Nations Compensation Fund for payment of war reparations imposed against Iraq. UN Security Resolution 706 was passed the same day and authorized countries to purchase up to $1.6 billion in Iraqi oil every 6 months, with the funds to be deposited into an escrow country controlled by the United Nations. Saddam Hussein’s regime chose not to participate in this arrangement.

In April 1995, the U.N. Security Council passed Resolution 986, which established the Oil-for-Food Programme. Resolution 986 authorized the sale of $1 billion in Iraqi oil in every 3 month period of time, with the revenue being controlled by the United Nations. This Programme began operating in December 1996.

30% of the revenue generated by the sale of Iraqi oil under the Oil-for-Food Programme was used to pay war reparations claims imposed by the U.N.C.C. In 2000, the U.N. Security Council reduced this amount to 25%.

In May 2003, U.N. Security Council Resolution 1483 passed which reduced to 5% the percentage of Iraq oil revenue sales required to be placed into the U.N. Compensation Fund. Resolution 1483 specifically states that:

“…unless an internationally recognized, representative government of Iraq and the Governing Council of the United Nations Compensation Commission, in the exercise of its authority over methods of ensuring that payments are made into the Compensation Fund, decide otherwise, this requirement shall be binding on a properly constituted, internationally recognized, representative government of Iraq and any successor thereto;”

Why Shouldn’t Iraq Have to Pay for Damage Done by Saddam Hussein’s Regime?

The answer lies in the question. The war reparations being paid are for damage inflicted by Saddam Hussein’s regime, which no longer exists. The people of Iraq had no choice in whether the invasion and occupation of Kuwait by Hussein’s regime took place. Indeed, up until his regime’s invasion of Kuwait, Hussein was an ally of the United States, Great Britain and others—despite his repression of the people of Iraq.

We do not take exception to those claims paid to and yet to be paid to individuals who suffered losses at the hands of Hussein’s regime. However, we do take exception to the inordinate amounts which are scheduled to be paid to governments, multinational corporations and other international actors. Every dollar sent to another country represents a theft from the people of Iraq—and further delay in their rebuilding of their country.

War reparations are the booty of the victorious in a war and are dispensed without considering the positions of the parties involved. For example, following World War II, Finland was ordered to make (and paid in full) war reparations to the Soviet Union—even though it was the Soviet Union that invaded Finland in 1940. Germany ceased making war reparations payments in about 1953—and never made war reparations to Poland—for its actions in the 1930’s and 1940’s.

War reparations will continue to prevent the Iraqi people from rebuilding their country. Virtually all of the funds yet to be paid will go to other governments which are rich in oil resources. At the same time, Iraqis are left to attempt to rebuild their own country after 14 years of brutal economic and military warfare. The continued imposition of war reparations claims against Iraq repeats the tragic and costly miscalculation of the Treaty of Versailles at the end of World War I. Harsh war reparations were imposed against Germany following World War I, exacerbating the devastation of the German economy, and contributing to the seeds which became World War II.

Why Should the U.S. Pay War Reparations to the People of Iraq?

Unlike the people of Iraq, who had no opportunity to influence the decisions and actions of Saddam Hussein, the people of the United States had the opportunity at any point in time since 1990 to act to change the policies and actions of the U.S. government. Every two years, we had the opportunity to vote to elect new Congressional Representatives; every 4 years the President was up for election; and every 6 years one-third of the Senators were elected. We had the opportunity to lobby our representatives; to pass initiatives at the local level to influence our government’s policies and actions; and to engage in other forms of public debate.

Despite this, our government’s policies remained unchanged since 1990. Those policies were and are to wage a brutal 15 year siege of economic and military warfare against the Iraqi people. Anyone who wanted to know in this country had the opportunity to learn and act upon the knowledge that several hundred thousand Iraqi children under the age of 5 died because of the economic sanctions; that the U.S. military deliberated targeted and bombed Iraq’s water treatment plants during the 1990-91 Gulf War; that the U.S. denied Iraq the opportunity to purchase items necessary to rebuild its water treatment systems; that the U.S. denied Iraq the opportunity to purchase needed medical supplies such as blood bags and needles for syringes; and on and on and on.

Because of the knowledge of what our government was doing in Iraq and because of our ability to change our government’s policies and actions, the United States must be required to make war reparations payments to the people of Iraq for these past 15 years of on-going and never-ending economic and military warfare.

VCNV Author

Jeff Leys