Baghdad rejoices at loss of burden

Iraq calls decision to eliminate debt an important stepping stone in the country's post-war recovery.

Sheikh Mohammed bin Rashid, the Vice President of the UAE and Ruler of Dubai, and Nouri al Maliki, Iraq's prime minister, stand for the national anthem in Abu Dhabi.

Iraqi politicians and international campaigners welcomed yesterday's cancellation of Iraq's debt to the UAE, and said they hoped other GCC countries would repudiate what they were owed as well. "This is very, very good news; the UAE is leading the way and other Gulf countries should follow," said Justin Alexander, the co-ordinator of Jubilee Iraq, a non-governmental organisation that has been campaigning for the elimination of Iraq's debt since the 2003 invasion.

"Sheikh Khalifa and Sheikh Mohammed are to be congratulated for doing this." Much of Iraq's estimated US$130 billion (Dh477bn) pre-war debt was owed to a group of 19 countries known as the Paris Club, which includes most of the EU, the US, Canada and Japan. In 2004, they agreed to cancel at least 80 per cent of the money they were owed, with some countries, including the US, going further and wiping the slate clean. About two-thirds of that debt has already been removed, with the final third dependent on Iraq meeting targets set by the International Monetary Fund.

"That amount of debt cancellation does not go as far as we would like, but it's pretty good when you consider Iraq's potential oil wealth. Normally, that level of cancellation is only available to very poor developing nations," Mr Alexander said. Of the US$80bn debt believed to remain, the bulk was owed to Saudi Arabia and Kuwait, Mr Alexander said. The UAE was the third-biggest creditor in the region, with some money also owed to Qatar.

"All of the money claimed by Gulf countries comes from the early to mid-1980s, when they supplied Iraq with oil and cash to help fund the war with Iran," he said. "The Soviet bloc and the West also provided financial support to Saddam during that period. It went into the pockets of the Baathists and didn't help the Iraqi people at all, so in terms of recovering that money the debt is certainly not morally enforceable, and is probably not legally enforceable either."

Iraqi politicians from across the political spectrum welcomed the UAE's decision. "The UAE has been supportive of Iraq and its efforts to rebuild, and this debt write-off is a generous step that we very much appreciate," said Ridwan Killidare, an Iraqi politician from Najaf who is a member of a secular coalition party led by Ayad Allawi, the interim prime minister of Iraq prior to elections held in 2005.

"The Emirates are at the forefront of Gulf-Iraq relations and we'd hope that other Gulf states, in particular Kuwait and Saudi Arabia, choose to follow this example and quickly take action to write off Iraq's debts. The debts are a burden to Iraq that, at the moment, we can ill afford to be paying." Sayid Mohammed Khateeb, an independent Shiite politician from Aziziyah, said the UAE had taken "an honourable position".

"We're delighted at the decision of the UAE to erase our outstanding debts - I understand the total amount is in the region of US$7 billion and it's extremely generous of them to let that amount pass," he said. "They have taken a significant burden from Iraq's shoulders. I hope other members of the international community will follow the UAE's example on this issue. "The UAE has taken up an honourable position with Iraq, and it is something that we do not take lightly and will not forget. I think we are all looking forward now to deepening relations between our countries and to a fruitful future."

Bashir Almohamdi, a Sunni politician from Baghdad's Adamiyah area, asked Arab states to put the past behind them and to move forward in a spirit of friendship. "The UAE has long been supportive of Iraq and this decision to cancel our debts is one of a number of steps they have taken to help us at these difficult times," he said. "I would very much hope that other Arab states, and Kuwait is the main one, would take a similar position and erase our debts to them.

"Of course, we want our brother Arab states to look at us as today's friend, not as if we are still yesterday's enemy." He said cancelling Iraq's remaining debt would help to speed the country's recovery, and paid tribute to the UAE for reopening its embassy. "Security has improved recently, but there are still problems and the Emiratis must be thanked for their courage in this matter," he said.

"Iraq is a proud country and it has been a source of unease for us that Arab states have not opened their embassies. The UAE has now taken that step and we are grateful." * Additional reporting by Nizar Latif in Baghdad and Phillip Sands in Damascus