Oil-for-food program Iraq
In February of this year the UN Security Council agreed to raise the amount of oil Iraq may sell every six months from $2 billion to $5.25 billion.The Iraqi reply to this was that they are able to lift only $4 billion worth of oil every six months and then only if they are supplied with $300 million in spare parts that are badly needed for the exploitation of the oil fields.The US insisted on first settling other subjects, like evidence that Iraq destroyed missiles indeed.Iraq, in turn, rejected the US proposal to renew the oil-for-food program automatically as long as the embargo against Iraq is in force. Iraq wants to negotiate the relaxation of the present sanctions every six months.

The oil sector and the increase of exports under the oil-for-food program are of supreme importance to the Iraqi economy. This also applies to the improvement of the infrastructure that would result in creating jobs in the electricity and water sectors.The present level of inflation will remain the same as well as the shortage of basic goods.

Iraqi oil fields
When the UN embargo against Iraq will be lifted is unknown. In the meantime, Iraq succeeded in signing agreements for the re-establishment of its oil fields with China National Petroleum Company for $1.2 billion and with a consortium led by Russia's LUKoil for an amount of $2.5 billion. When this agreement can be executed depends on the UN; as long as the sanctions against Iraq are not lifted, nothing can be done.

The embargo has been in force now for eight years. The UN Security Council wants to continue the embargo though they are considering softening the sanctions. In particular Russia, France and China insist on moderation of sanctions. In pursuance of a favourable report on Iraq, Russia proposed to close the nuclear dossier. The USA and UK strongly opposed.

Angolan peace process
Unfortunately the efforts of the last four years to neutralise bursts of violence in Angola did not succeed and peace is still far off. UNITA (National Union for the Total Independence of Angola) partisans regularly stage violent attacks, particularly in the central and southern provinces where UNITA still controls the diamond mines. UN employees and Russian observers say that UNITA is threatening the peace process with their violent actions. In the south-west new mines were laid and armed bands attack rural towns again and again. More than 40.000 people fled to the cities. It is clear that the peace agreement of 1994, after 20 years of civil war, is in a deadlock now. The implementation of the peace process is more than a year behind schedule.Russia repeatedly summoned both conflicting parties to proceed with the peace process. UNITA, which lost the elections of 1993, is still refusing to hand over control of key cities to the ruling MPLA (People's Liberation Movement of Angola, the former Marxist People's Movement for the Liberation of Angola). Not only UNITA but also deserting bands of security forces are responsible for widespread violence. The UN Security Council unanimously condemned the violence and is threatening with sanctions.

Angolan privatisation
The government claims to have privatised 1,000 state enterprises since 1990, which should have fetched some $100 million. It is a well-known fact that few of these enterprises were tendered publicly and it is also well-known that many companies came into the hands of members of the ruling MPLA Party. As an alternative to total privatisation, foreign companies have been invited to co-operate under management contracts. Some 600 important companies, like telecommunications, banks, airports, national oil fields and diamond mines, firmly remain state property.

Russian help for Angola
Russia has forgiven Angola a debt of $4 billion, dating from the cold war period. Also did Russia close a co-operation agreement with the country to the amount of $150 million. The deal settles the Russian supply of modern weapons, training of Angolan soldiers and technical assistance.

Angolan economy
The economy is at a low level, notwithstanding foreign investment, especially in the energy sector. A higher oil production should be reached because the world market price for oil is low. The economic growth of Angola now depends on the proceeds of diamond. Higher oil production hardly contributes to the expansion of the Angolan economy. Besides that, the distribution of the revenues is exceedingly crooked. The majority of the Angolan population lives in poverty, but the government continues spending most of the money on defence, to the detriment of food, health-care and education. Many exporters are still holding uninsured trade debts, due to the fact Banco Nacional de Angola is defaulting on Letters of Credit. There are no new credit lines available and practically all national insurers are off cover. Banks are very reluctant to grant new cover. East-West Debt has been able to solve Angolan claims of exporters and has spare capacity available for solving other claims.

Debt rescheduling Cuba/Japan
On 18 March 1998 the Cuban government signed a debt agreement with Japan for an amount of 100 billion Yen. By means of this agreement the communist-ruled country hopes to open the way for Japanese companies to invest in the island. The last few years European, Mexican and Canadian investors already set out for the Cuban market. Japan was strikingly absent because Cuba still owes $1 billion to Japanese companies. The foreign debt of Cuba to individual creditors is $10 billion now.

Cuban bank reform
In 1996 the Cuban government founded a new Central Bank: Banco Central de Cuba. This newcomer in Cuban banking is the sequel to the Banco Nacional de Cuba, the bank that since 1960 combined the functions of Central Bank and Commercial Bank.

Banco Central de Cuba supervises the banking sector, it has special legal identity. Banco Nacional de Cuba acts as a commercial bank and is holding Cuba's foreign debt of some $10 billion. The new Banco Central de Cuba will guide future debt negotiations. The restructuring of the banking system in Cuba has led to the situation that claims are held by a commercial bank with hardly any assets. The recovery of claims on Cuba therefore has become more difficult.

Vietnam suffers from regional crisis
Recently the censorship of the Communist Party in Hanoi prevented local news getting to foreign media, the government being worried that Vietnam's image abroad could be damaged and so its exports. Therefore the local media did not report the affect of the Asian financial crisis on Vietnam's economy.

The basis of Vietnam's income is the sale of rice, crude oil, coffee, rubber, textiles and shoes. All exports, except rice, have been hit through the regional downturn. External investments are badly needed to finish partly completed projects like hotels.

The International Monetary Fund, World Bank and Asian Development Bank insist on structural reforms, that would relieve the trade deficit.

The foreign trade debt of Vietnam is of about $10 billion, or 55% of the gross domestic product. Without efforts to initiate changes in the trade regime, the deficit will grow. Imports should be restrained, the state owned companies and financial system need reform but only political reform can solve the problems thoroughly.

Congo's debt burden
The Democratic Republic of Congo, the former Zaire, is bending under a huge foreign debt: $14.6 billion of which $10 billion is owed to bilateral creditors (the Paris Club) and $3.1 billion to multilateral lending-institutions. These liabilities are the equivalent of 225% of former Zaire's gross domestic product and more than 850% of the exports. The big loans, which were extended to the Mobutu-regime, are now considered as irresponsible and dialogues are held with the government of Congo to come to a deal with foreign creditors. During a formal meeting of the 'Friends of Congo', chaired by the World Bank, representatives of the various governments are expected to argue that the World Bank, the International Monetary Fund and the African Development Bank acted irresponsibly in lending so much capital to the regime of former Zaire, while evidence showed excessive corruption. In 1993 debt servicing was stopped and the arrears have risen to about $9 billion. Congo owes the World Bank $1.4 billion with arrears of $150 million. Arrears to the IMF are $450 million and to the African Development Bank $550 million. The World Bank wants to settle the repayments before new loans can be discussed which Congolese officials fiercely opposed. They argue that it is the fault of the lending institutions to allow the Mobutu-regime such substantial foreign debts. The persons concerned in the recovery program for Congo emphasise that they are willing to help finding solutions for the new government in view of Congo's strategic importance.

Kenyan economy
The Kenyan economy is in a destructive spiral. Last year it was clear that the economy would come under high pressure. In August 1997 the IMF and the World Bank stopped their support and foreign investors lost their confidence in the Kenyan government and withdrew. Shortly thereafter the bilateral aid for the country was restrained systematically. Kenya also suffered from the weather phenomenon El-Niño. Agriculture and infrastructure were damaged. Meanwhile a new drama occurred: ethnic murders are responsible for the receding of the tourist industry of 40-60%. The Kenyan economy has come in a downward spiral: the country needs more and more money to pay ever higher interest rates on old foreign debts. The last few months a run for cash has started. Steps were taken to check petrol smuggling. Politicians who dumped untaxed sugar on the local market had to pay duties. Obviously this was not enough and accelerated privatisation would be a good way to raise revenues. However, to make enterprises like Kenya Posts and Telecommunications attractive for sale needs a lot of time and effort. Furthermore the country can just hope for donors and try to persuade international institutions to get assistance going again. Kenya does its utmost, which may be evident from the fact that the government has started to take the top of the Treasury and the Central Bank to court to ultimately tackle corruption.

Trade debt time-barred?
A claim originating from export activities can become time-barred, just like any ordinary claim. For a creditor it is of importance to take action before it is too late. When a claim is getting time-barred depends on the period, the sales contract and the law under which the contract between debtor and creditor has been closed. For further information, we would be pleased to advise and assist you.

TRADE DEBTS - BLOCKED FUNDS - ASSET TRADING - OVERDUE OUTSTANDINGS IN HIGH RISK COUNTRIES?

For further details, please contact East-West Debt and ask for our debt collection department.
Telephone +323 231 45 03 - Fax +323 231 95 45.