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Iraq: Baker On Tour To Convince Europe To Forgive Baghdad's Billions In Debt

Former U.S. Secretary of State James Baker is traveling in Europe this week in a bid to convince European leaders to write off large amounts of Iraqi debt. Reports say he's hoping to benefit from the goodwill generated by the 13 December capture of former Iraqi leader Saddam Hussein. Baker's first stop today was Paris, but the French -- as well as the Germans and Russians -- are still chafing at a Pentagon directive last week excluding them from U.S. reconstruction projects in Iraq.

Prague, 16 December 2003 (RFE/RL) -- Former U.S. Secretary of State James Baker has begun a high-profile trip through Europe to try to convince leaders to forgive at least part of Iraq's enormous debt.

Baker, traveling as a special envoy of U.S. President George W. Bush, met today with French President Jacques Chirac. Baker will also travel to Germany, Russia, Britain, and Italy.

In early comments after today's meeting with Chirac, Baker said he is optimistic. "I got an extraordinarily warm and friendly reception here, as I always have when I have come here," he said.

He said the United States and France both "want to do what we can to reduce the oppressive debt burden on the Iraqi people so that they can enjoy freedom and prosperity, and we would like to do that in the year 2004 and through the mechanism of the Paris Club."

Gaining agreement with France -- as well as with Germany and Russia -- is viewed as crucial to U.S. efforts to reduce Iraq's estimated $120 billion in sovereign debt. U.S. officials say excessive debt payments would stifle any Iraqi economic recovery.

The three nations were among Iraq's biggest lenders in the 1970s and 1980s, when most of the debt was amassed. Figures vary, but Iraq owes France around $3 billion, excluding interest. It owes Germany as much as $4 billion and Russia anywhere from $3 billion to $8 billion.

The three are also key members of the Paris Club, an informal grouping of the most important creditor nations, including the United States, the European Union states, and Japan. Any debt forgiveness for Iraq would likely have to be worked out among the club's 19 members.

French Foreign Minister Dominique de Villepin hinted last night that some type of debt agreement can be reached with Iraq. "France, along with the other creditors, believes that an agreement [on Iraq's foreign debt] could be reached as soon as 2004, if the conditions are right," he said. "France could thereby consider debt cancellation appropriate to and compatible with the financial capacities of Iraq."

But the French offer is said to be conditional on a fully sovereign government being in place in Baghdad -- something that won't happen before July 2004, at the earliest.

The mood in France, Germany, and Russia is still sour following a Pentagon directive last week that bans companies from the three nations from participating as prime contractors in U.S. reconstruction projects in Iraq. The directive said only companies from the United States, Iraq, and 61 other countries judged sympathetic to the U.S.-led coalition can bid for contracts worth a total of more than $18 billion.

Reports say U.S. officials were hoping the capture of Saddam Hussein might generate enough goodwill to allow Baker to make some progress.

German Defense Minister Peter Struck said he hopes the issue of reconstruction contracts will be part of the U.S. envoy's discussions in Berlin tomorrow. Struck pointed out that Germany did contribute to the Iraqi war effort indirectly through its watch over U.S. military airports, hospitals, and bases in Germany.

"I hope that the talks that James Baker will have here in Berlin will result in a change in U.S. policy [toward German companies]. I do not understand this policy, especially since Germany made an important contribution through keeping watch over [military] installations here in Germany," Struck said.

Reports say the United States may be seeking to have as much as two-thirds of Iraq's debt written off. This would be similar to a deal made by the Paris Club with Yugoslavia after the fall of President Slobodan Milosevic.
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    Mark Baker

    Mark Baker is a freelance journalist and travel writer based in Prague. He has written guidebooks and articles for Lonely Planet, Frommer’s, and Fodor’s, and his articles have also appeared in National Geographic Traveler and The Wall Street Journal, among other publications.