Cash-strapped Iraq seeks to defer Kuwait war reparation

Final instalment of $4.6 billion difficult amid shortage of funds caused by falling oil prices and war with ISIL.

BAGHDAD // Iraq is seeking to postpone a final instalment of reparations for its 1990-91 occupation of Kuwait as it faces a cash crisis caused by falling oil prices and war with ISIL.

“We have been really committed to paying this on time up until now,” the Iraqi finance minister Hoshiyar Zebari said.

“We are in discussions with the Kuwaitis, trying to defer the payment for two years or at least a year, to allow some space... to present a realistic budget.”

Iraq is due to pay US$4.6 billion (Dh16.9bn) next year in the final intalment of the war reparations.

Since Iraq was first allowed to resume oil sales nearly two decades ago it has paid funds into a United Nations body overseeing compensation for looting and damage inflicted during Saddam Hussein’s seven-month occupation of Kuwait.

More than a million claimants have been paid and nearly all the $52.4bn reparations bill has been met through Iraq’s annual allocation of 5 per cent of crude oil exports to the UN Compensation Commission (UNCC).

But with its economy now set to shrink for the first time since the 2003 US-led invasion toppled Saddam and ended more than a decade of sanctions, Iraq can ill afford to divert a large chunk of the 2015 budget to make that last payment.

A senior UNCC official in Geneva said no decision had yet been made, and any change would require the agreement of its governing council, which has same 15 member states as the UN security council.

“We are hearing the governing council will be considering the issue at a special session next week,” the official said, with a meeting tentatively set for December 18 in Geneva.

There was no immediate comment from Kuwaiti officials.

Opec producer Iraq is suffering from the sharp fall in oil prices and the takeover of areas in the north and west by the extremist militants, which has caused mass displacement of people, destruction of infrastructure and a sharp increase in military expenditure.

Iraq needs Kuwait’s agreement to delay payment because the last, and largest, outstanding claim for compensation comes from the emirate itself for damage to its oil facilities.

“There is an understanding,” Mr Zebari said. “Next week there will be some hectic diplomatic activity between Baghdad, Kuwait, Geneva and New York in order to present a joint request to postpone the payment.” A delay of one or two years would give Iraq “some breathing space”, he added.

* Reuters

Published: December 13, 2014 04:00 AM

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