East West Debt, solving defaulted trade and bank debt

East-West Debt march 2003 news, update : IRAQ

Iraq

The world financial community will face a tougher challenge if it is called upon to rebuild Iraq than in the case of former outcasts Iraq than in the case of former outcasts like Yugoslavia or Afghanistan. Success of the American policy of "regime change", toppling the Iraqi leadership via threatened military action, would make an end to a 12-year UN embargo likely. Then, the international community would have to assess the now unknown costs of rebuilding Iraq. International leaders will also have to resolve what to do about billions of dollars in past debt and war reparation claims. Even if any U.S. action manages to avoid the kind of destruction seen in 1991, the task to rebuild Iraqi economy will be still massive.

Even Yugoslavia, the closest recent parallel to Iraq in terms of debt profile and sanctions, would not compare in terms of scale in aid requirements and external obligations. After the handover of ex-president Slobodan Milosevic to the United Nations war-crimes tribunal in the Hague in 2001, the United States and other donors pledged $1.3 billion to the Federal Republic of Yugoslavia, excluding Kosovo. Government creditors forgave 66% of Yugoslavia's $4.5 billion in debt and gave Belgrade 22 years to repay the rest, including a six-year grace period.

For Iraq, even the roughest estimates run higher.

Figures for what the country will need in assistance range from as low as $1 billion to $7 billion annually for several years to as high as tens of billions for total reconstruction. The figures for Iraqi debt also range widely from around $42 billion to over $126 billion with some obligations stretching back to an eight-year war with neighboring Iran in the 1980s. In this respect, it is unlikely that Iraq will be able to pay back its prior 1990s debts.

Therefore, foreign banks and companies have to act now to safeguard their rights and to avoid time limitation of their claims. In this respect, East-West Debt offers the most attractive solutions on the basis of its long-lasting experience in this area. In contradiction to others, East-West Debt succeeds to avoid notification problems in court proceedings and is able to recover amounts from Iraqi debtors. Iraq has to close a war reparations file stemming from its invasion of Kuwait in August 1990 and a seven-month occupation. The United Nations has approved about $43.6 billion of the $300 billion worth of claims lodged against Iraq so far.

The impact of a potential U.S.-led invasion on Iraq represents a major downside risk to the International Monetary Fund's forecast for global economic growth in 2003. The biggest economic fallout from a war in Iraq would come in the form of oil-supply disruptions, which could push up prices. The IMF estimates that a $5-per- barrel sustained increase in oil prices would shave 0.3 percentage point off global economic growth. The IMF's economic forecasts are based on an assumption of oil being priced at $24 a barrel.

 ALGERIA  ARGENTINA  BRAZIL  EGYPT
 INDONESIA  IRAN  IRAQ  CONGO  NIGERIA  PAKISTAN  TURKEY  UKRAINE  SAUDI-ARABIA  AZERBAIJAN