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Future Iraq, Past Debts

Paul Staines thinks Iraq should give Russia and France exactly what they are owed…

Bringing Democracy to Iraq may prove difficult if the Americans are wary of the potential result; namely Iraq voting to become Iran-lite. But bringing prosperity should prove easier. The dispatch of a corrupt gangster-regime of looters can only assist. David Plotz writing over at Slate makes some good market orientated points.

But why do I have the suspicion that a Washington written program devised by the likes of the World Bank and IMF might be less than turbo-charged. If we go from warfare to welfare for Iraq, the outcome will be a burden on Coalition nation taxpayers as well as Iraqi proto-capitalists.

Privatisation of the oil fields is being painted by those who marched against a ‘war for oil’ as if its Bush’s personal peace dividend. But it seems to me eminently sensible and appropriate. Split the oil fields up by region, privatise ’em and give ’em to the people.

If it can not be done by direct mass privatisation via a Thatcherite give-away, with every Iraqi citizen/stock holder receiving an annual dividend check, then set up trust funds chartered to pay dividends for infra-structure capital projects that directly benefit the people. Maybe they can securitise the trust’s future earnings to get up front capital to finance urgently needed projects immediately: Iraqi owned and inviting to badly needed foreign capital, a win-win for everyone. Just make sure that the oil trusts are transparent, with contracts public knowledge so that corruption can be thwarted. George Soros’ Publish What You Pay NGO is one of his best ideas.

As for Iraq’s debts, its obviously a matter for the future government of Iraq whether they honour them or not. But I suggest they repay Russian debts with easily and cheaply sourced Czarist bonds. Chirac’s contracts will of course be subject to some ‘re-negotiation’ by the newly democratically elected government of Iraq. Payback can take many forms, monsieur.

Paul Staines

7 comments to Future Iraq, Past Debts

  • Jacob

    Paying Iraqi debt to Russia with Czarist bonds !
    What a great idea !!
    I also suggest that if Russia and France want to collect something on Saddam’s debt they would better try to find him and his assets. Or maybe they could sue Uday in Belgium.

  • Martin Adamson

    It’s a bit hard to see why present day Iraq should be responsible for debts incurred by a non-existent regime (Saddam’s) to a non-existent country (the USSR.)


  • Mike G

    Yes it is a bit hard to see, and yet it’s something taken very seriously by… the financial community that made the bad loans.

    The problem with saying “You lent money to the last guy, get it from him,” as just as it is in certain ways, is that as a worldwide principle it could really cause a panic– where do you draw the line? Would Republican presidents get to repudiate Democratic debts? Would the Fifth Republic get to repudiate the Fourth Republic’s? The result would be a one-time windfall and permanent damage to the international lending business– and economy.

    What we need is a way in which a few lenders get burnt, making people more leery about handing over money to kleptocrats in the future, but the whole idea of lending money to developing countries isn’t wrecked for everybody. 50 cents on the dollar for France, Russia, etc., is more than they deserve, but hopefully enough to make them hurt a little and behave better next time…

  • Anything which makes the financial community leery of lending money to governments, especially despotic regimes, is a VERY GOOD thing. If they lose their money on bad investments, even better. That will make them much more careful in the future to properly evaluate the risks. And it will force governments to create a stable environment and legal system in which investors’ money can be expected to be protected.

  • John Palmer

    Better yet, give up rights to a couple of oil fields as resolution of the debt by the interim government on the last day of that government, and the next day the new government nationalizes the oil fields back. Given the history of USSR supporting nationalization of previous private assets, they haven’t got much room to bitch.

  • Jacob

    Lending money to Governments is a bad thing. It should not be encouraged.
    I suspect most of the loans were made by other Governments out of funds stolen (taxed) from their citizens. Most of the loans were used by Saddam to buy armaments and WMD, and build palaces. I support every measure to discourage such transactions. So – those who lent money to the Iraqi government should suffer the (minimum)just consequences of supporting a murderer, and lose their money. It would be outright immoral to make the Iraqi people to pay for the loans of their torturers.
    As to private loans, or commercial loans between businesses – they should be settled in a normal manner between the parties involved.

    Mike said:
    “The result would be a …. permanent damage to the international lending business– and economy.”

    The result would be a very important message: don’t lend money to tyrants and murderers, don’t try to turn a fast buck at the expense of oppresed people.
    As I said “the international lending business” between governments should be discouraged.

    Of course, those politicians who made the loans in the first place got their kickback up front in cash, and are now happily and comfortably retired.

  • Doug Collins

    I wholeheartedl agree with the idea of Thatcherization of the existing oilfields-if that’s the right word. For a model, one can look to Alaska where that has been done with the state’s royalty from the North Slope fields for years. So far as I know it is working well.
    Don’t, however, forget the undrilled undiscovered oil reserves of the country. They are undoubtedly huge, possibly more than has already been found.
    Why not divide up the subsurface mineral rights and put them under private ownership. I just did a quick calculation and found that works out to about 4-7 acres per Iraqi. Some tracts would obviously be attractive and some would be goat pasture, but with a lottery system, the inequities could be fairly distributed. There should be a prohibition on selling the rights for about 18 years so children can reach their majority and everyone else can learn enough to avoid being ripped off.
    This arrangement would have several advantages. For one, the interest of a large segment of the Iraqi people would diverge from OPEC in the event of an embargo. It is one thing for the Sultan/Caliph/Supreme Leader to lose money to injure the Great Satan. It is something else again when it is coming out of your own pocket.
    The wide private ownership of mineral rights would be a big boost to the development of a middle class.
    American and British oil companies, with land acquisition staffs experienced in obtaining leases from private mineral owners would have a great advantage over French and Russian companies that are used to just dealing with governments.
    And finally, I recall a breakfast cereal promotion when I was a boy in the 1950’s. Ralston’s sponsored Sgt. Preston of the Royal Mounted Police on television. At one time, each box of Ralston’s cereal included a deed – a real legal deed- for a one square inch tract of land in Alaska. Now, looking back, I see a rather tenuous connection between Alaskan land and the Canadian Mounties, but Alaska was not yet a state then and from the point of view of little boys in the lower 48, they were both northern and snowy so we overlooked or failed to notice that.
    Anyway, over the years, I have met many fellow owners of inches of Alaskan real estate-It is amazing how many people remember that promotion. Perhaps we could provide the Iraqi people with that same warm feeling of propietorship.
    On the question of Iraqi debt- I seem to recall that only Finland has ever paid the US back for it’s war debts. If Russia and France owe us much, why don’t we give our receivables to Iraq, much as a business sells its bad debts to collection agencies. The Iraqis could then just clear the books.