Iraq's foreign debts in spotlight

By Mark Gregory BBC World Service business reporter

Iraq owes Kuwait compensation for the 1990 invasion

The Paris Club of rich lending nations is meeting to decide how to deal with Iraq's foreign debts.

The country accumulated several hundred billion dollars of debt while Saddam Hussein was in power.

Now America is pressing Iraq's creditors to write off debts or reduce the amounts claimed to free up resources for reconstruction after the war.

Nobody really knows how much Iraq owes foreign creditors but, according to the Centre for Strategic Studies in Washington, the figure may be as high as $380bn (£238bn).

That would make Iraq one of the world's most highly indebted nations, owing ten times more in relation to the size of the economy than either Brazil or Argentina - countries with well known debt problems.

Ending sanctions

Iraq's major creditors include France and Russia, both owed about $8bn, mainly for weapons bought by Saddam Hussein.

But by far and away the biggest element of the debt is compensation owed to Kuwait after Iraq's invasion in 1990.

America is keen that creditors release a post-Saddam Hussein Iraq from the obligation to repay his loans, but negotiations are likely to be contentious.

A deal on this issue will be closely tied in with discussions on ending UN sanctions.

But the first priority is to work out exactly what Iraq owes and to whom.

It was the main subject for discussion at a closed meeting of the Paris Club - a grouping of 19 mainly Western creditor nations - in the French capital.