Iraq creditors divided on writeoffs

Published February 5, 2004

LONDON, Feb 4: Iraq's creditors are still divided over whether the country needs a huge debt writeoff or a repayment rescheduling which would give it a breathing space until it starts pumping more oil, a creditor source told Reuters.

Speaking on condition of anonymity, the source, who represents one of Iraq's smaller creditors at the Paris Club, said any deal could be in place as soon as September or October.

"I would give them a stand-still moratorium for a few years till they export enough oil (to restart payments)," he said.

"These views are quite well-shared. Every country has to use budgetary means for paying its export credit agency," he said, referring to the cost to tax-payers of compensating firms for bad debts in Iraq.

Iraq owes the Paris Club of 19 creditor countries around $40bn of principal and missed interest payments on debts incurred before its invasion of Kuwait.

The International Monetary Fund estimates Iraq owes a total of $120 billion, much of it to countries like Saudi Arabia, Kuwait, China and former communist states in eastern Europe who are not formally bound to the Paris Club.

Many commentators have called for big reductions for Iraq, which is the world's most indebted country in terms of income per capita.

World Bank President James Wolfensohn said last month he believed most of Iraq's major government creditors were willing to forgive two thirds of the war-ravaged country's debt. France, Germany, Japan and Russia have all promised big reductions. But there has been resistance from countries who believe Iraq is an oil rich state which has huge export potential and was economically mismanaged by Saddam Hussein.

The source said it was not clear what the cut-off point of any debt reduction would be and there remained disputes within the Group of Seven rich industrial nations over any deal.

"I'm not sure if the G7 is in agreement. All of them have said they would write off the total, but how much is the total?" he asked.

As well as deciding what proportion of debt to write off, the Paris Club would also have to decide which debt was eligible. "That (a deal) would be possible in September, October," he said.

LPG imports: Iraq will need to import 75 per cent of its Liquefied Petroleum Gas needs this year because its own refinery production continues to be disrupted by acts of sabotage and power shortages, a leading ship broking and oil consultancy said in a report, which released in London.

US-based Poten and Partners said sea and land imports of LPG, used mostly for domestic cooking in Iraq, will remain high as the war-ravaged country staggers back to its feet. It estimated demand at about 1.4m tons per year.-Reuters

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