Russia Writes Off 90% of Iraq Debt

Posted in Russia | 18-Dec-04 | Author: Dmitry Udalov

There is no doubt that the situation in Iraq is a matter of great concern for most countries. Each state sees the situation from a different angle. Russia is not an exemption. Russia’s relations with Iraq started long before the present military operation. Iraq’s 8 billion dollar debt to Russia is the result of such cooperation. Last week, 90% of the debt was written off.

On December 8, Russian President Vladimir Putin held talks in Moscow with the Prime Minister of the interim government of Iraq, Iyad Allawi. Allawi was invited to Russia by the Russian head of state. He was accompanied by heads of several leading ministries and departments.

Both sides discussed issues of bilateral cooperation and talked about what Russia could do to support the people of Iraq on the path to restoring the Iraqi economy. Russia also supports all efforts to achieve political stabilization in Iraq. For example, Russia supported Resolution 1546 in the UN Security Council to organize elections in Iraq on 30 January next year.

Of course, there are forces that wish to disrupt this process. Speaking honestly, Putin stressed that he could not imagine how elections could be organized while Iraq is completely occupied by foreign troops.

Russia supported the decision of the Paris Club and decided to write off a significant part of Iraq’s debts to the Russian Federation. Initially, Russia took on the responsibility of writing off 65% of debts; then Russia endorsed the recent decision of the Paris Club to write off over 90% of the debt. In an official statement, Putin said: «We are doing this out of a feeling of solidarity with the friendly people of Iraq».

At the same time, Russia hopes that the Iraqi government and the future government of Iraq will take the interests of Russian companies into account in the restoration process after the elections on 30 January 2005. Talks on these issues were held during the meeting as well.

However, some Russian experts did not favor the Kremlin’s decision to write off Iraq’s debts. They found it unnecessary and useless for Russian national interests and said it was a betrayal of the Russian people. Their arguments were quite simple: Russia has already written off 11 billion dollars to the developing countries and has not gained any political or economic benefits from such action. While it was reasonable to write off Nicaragua’s debt because the country was destroyed after the civil war, Iraq having a wealth of oil resources might be able to pay back the debt to Russia.

Most experts are not satisfied with the fact that other countries (the UK, France, Germany) write off much smaller amounts of a country’s debts, while the US does it very seldom if at all.

Nevertheless, Russia demonstrated its readiness to work constructively on the reconciliation process in Iraq even though it had to make sacrifices for global stability.