Reparations dog Iraq reconstruction

Paul Bremer’s call for Saudi Arabia and Kuwait to forgive Iraq its 1990 invasion of Kuwait and cancel reparation payments comes at a strange time, some analysts argue.

Oil for reconstruction? Not yet
Oil for reconstruction? Not yet

They believe it is little more than another bid by the US for helping to offload the huge financial burden of occupation and reconstruction of the war-ravaged country.

Others however believe that regardless of motive, Iraq must be forgiven for the excesses of its deposed despotic former president.

More than a decade ago, Saddam Hussein, in an act of gross misjudgement, invaded his southern neighbour Kuwait. His resulting defeat and international isolation, plunged a previously wealthy Iraq into a spiral of debt and poverty.

Not only was the country of 22 million people shackled by international sanctions, but it was also forced to face gigantic claims for Gulf War damage – so large that there is almost no way to recover the money.

UN compensation commission
By March of this year, Iraq had paid about $7 billion in compensatory damages to a whole host of differing plaintiffs.

Further claims amounting to some $276 billion are in the pipeline at the United Nations Compensation Commission (UNCC) in Geneva, according to the Commission’s Web site.

“The international community must issue a new decision to drop some of Iraq’s reparations and debts”

Hammed Aljumaily,
head of school of economics, political science department, 
Al Nahrain University

If the current situation continues, it is the US that will effectiveely be paying these claims. America was hoping to use Iraq’s oil revenue to help meet the costs of reconstruction, estimated at about $100 billion over the next 3-4 years.

With oil production still below its pre-war levels, the US is being forced to pay for the bulk of rebuilding out of its own pocket. Reparation payments only increase the burden.

America’s electorate, already wearily eyeing President George Bush’s congressional request for a further $87 billion in Iraq reconstruction funds, will not look kindly on his re-election bid next year if their economy staggers under Iraq’s weight.

Lost oil revenue

Until now, the UN Compensation Commission has processed the smallest and most straightforward claims. Earlier this week it turned to the first of the big ones: a $21.5 billion demand from Kuwait for lost oil revenues.

The scale of the claims has put experts and officials in a quandary. Some argue that future generations of Iraqis cannot reasonably be expected to continue paying for Saddam Hussein’s folly.

Others insist that war victims are entitled to compensation and that to let Saddam off the hook would set a dangerous precedent.

In total, about 100 governments have lodged some 2.6 million separate claims, on their own behalf and on behalf of individuals and companies.


Although Iraq agreed 10 years ago to pay compensation for losses caused by the invasion and occupation of Kuwait, there was no practical way to recover the money until December 1996 when the UN’s oil-for-food programme started.

Since then, 30% of the revenue from Iraq’s oil sales under the programme has been deducted to pay for war damage and the cost of running the UN commission.

“Reparation was their main excursion into the economic field, and they settled it as a problem of theology, of politics, of economic chicane, from every point of view except that of the economic failure of the states whose destiny they were handling”

John Maynard Keynes, observing Versailles in 1919

The amount that can be collected in this way varies with oil prices but currently stands at about $400 million a month, money the US could well put to use in aiding Iraq.

At that rate, if all the outstanding claims were approved, it would take Iraq 58 years from now to pay off the debt.

Interest repayments

As soon as the main debt is paid, Iraq will – under current regulations – be required to pay interest for delayed payments from 1990.

The UN has no way other than through the oil-for-food programme to collect compensation payments.

Earlier this month, a British Foreign Office spokesman hinted at the fact that the UN may eventually have to choose between abandoning hope of compensation and continuing sanctions into the next century.

Arthur Rovine, president of the American Society of International Law and an expert on Gulf war compensation, told Iraq Today in August that when the oil-for-food programme ends “the chances of the claimants collecting all the monies due them would be reduced severely and perhaps to nil.”

He continued: “Unless Iraq agreed to a mechanism and process similar to the UNCC, the only alternative would be lawsuits by claimants around the world in places where they can attach Iraqi assets, including oil assets.

Israel to India

Everyone from Israel to India continues to await millions in payment for workers’ lost wages and for repatriating stranded citizens.

Every worker expelled from Kuwait by the Iraqi invasion can claim anywhere from $2500 to $8000; multinationals and other companies are seeking up to $80 billion from Iraq; and more than eight governments are seeking $210 billion in claims.

In the end there is no way the US can square the circle of paying for Iraq’s reconstruction whilst also footing the bill for billions of dollars in reparations.

”The international community must issue a new decision to drop some of Iraq’s reparations and debts,” Hammed Aljumaily, head of the school of economics in the political science department at Al Nahrain University, told the website Iraq Today last month.

“What will Iraq be able to do under the heavy debts, huge compensation requirements and major financial demands of rebuilding the public institutions damaged during the war?”

Source : Al Jazeera, News Agencies

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