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Last Updated: Thursday, 23 October, 2003, 08:17 GMT 09:17 UK
Mixed bag in Madrid

by Paul Reynolds
BBC News Online world affairs correspondent

The Madrid conference on aid for Iraq is likely to produce a mixed result, with some big contributions and some gaps, reflecting the divisions which were evident over the war itself.

Iraqi electric pylons destroyed near Basra
Iraq needs about $36bn in reconstruction aid until 2007
The unanimous passage of a new United Nations Security Council resolution giving qualified approval to what one might call the policy of "pacify and depart" has helped the atmosphere and will produce a bigger pot of money than had at one time been expected - but it has not opened all the wallets.

The big money will come from the United States which is pledging about $20bn, though there is a congressional battle going on about whether half of that should be a loan not a grant.

The American money would be split between electric power, water, oil production, transport, housing and health, with chunks for public safety and law enforcement as well.

Madrid should mark the beginning of sustained economic recovery
Hilary Benn
UK minister

A separate assessment of Iraqi needs has come from the World Bank and the UN and this amounts to $36bn between now and 2007.

Towards this sum, Japan has come up with $1.5bn, and Britain and Spain, supporters of the war, have promised $825m and $300m respectively.

Row over British funds

Some of the British funds will come from aid originally earmarked for other countries, though not the poorest. This has upset British charities but the British government says it is part of a trend to shift funding from "middle income" countries to the poorest ones. Iraq now qualifies as among the poorest with an annual income per person of some $400 to $600.

The EU figure is a mere $200m.

Further big sums will come from the World Bank itself which is expected to come up with between $3.5bn and $5bn over five years.

The participation of the World Bank is probably the best confidence-building measure of all, as it signals a level of international support for the plan.

Nothing from some countries

But despite Iraq's need, France and Russia are giving nothing. Germany is offering only $100m, half of which is its share of a European Union grant. None of them want to be seen to be propping up an occupation.

France is sending a low-level delegation.

The Russian Deputy Foreign Minister Yuri Fedotov said: "Iraq is not a poor country and has oil, agricultural and industrial resources. Russia is not planning to make a donation."

The optimists say that the conference should help normalisation in Iraq.

The British Secretary for International Development Hilary Benn, who is leading the British delegation, said: "Madrid should mark the beginning of sustained economic recovery."

He admitted however that two other elements of policy - security and democracy - were needed as well.

"If we can make the process succeed, Iraq should have a brighter future after its nightmare," he said.

Trust Fund

One important element is an agreement to channel money through a new fund, the Multi Donors Trust Fund, to be administered by the World Bank and the UN, with various supervising committees.

Iraq is not a poor country and has oil, agricultural and industrial resources
Yuri Fedotov
Russian minister

This has been established as a way of allowing countries to contribute without going through the American-led Development Fund for Iraq.

There had been a concern that otherwise, donors would simply be supporting American and British policy.

The debt issue

One big issue which is not on the formal agenda but which will certainly be on the delegates' minds is that of Iraqi debt.

Saddam Hussein ran up foreign debts of between $95bn and $150bn, according to figures compiled by Jubilee Iraq, a London-based network of Iraqi exiles and sympathisers who are calling for the debt to be written off.

"This is an odious debt," said Jubilee Iraq spokesman Justin Alexander. "The Iraqi people got no benefit from it. It was used to fight the war with Iran."

The problem of Iraq's debt is to be dealt with over the coming months by the so-called Paris Club, made up of governments which are owed the money.

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