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Italy OK's debt plea by Baker for Iraq

ROME -- Italy said yesterday it agreed with the United States on the need for a "substantial reduction" of Iraq's debt and wanted a wide range of countries to be involved.

 

US special envoy James Baker met Italian Prime Minister Silvio Berlusconi, a strong supporter of the American-led invasion of Iraq, in the latest stage of Washington's drive to seek support in reducing Iraq's estimated $120 billion debt.

Baker has met French President Jacques Chirac and German Chancellor Gerhard Schroeder, opponents of the war, who said they were prepared to offer substantial debt relief through the Paris Club of leading creditor nations.

A statement from Berlusconi's office said action should be taken through the Paris Club, but also cast the net further, which analysts say is key to resolving Iraq's debt problem.

"Berlusconi and Baker agreed on the need for an agreement with other creditor nations to reduce the debt caused by a dictatorial regime that has reduced Iraq to poverty," the statement said.

White House spokesman Scott McClellan called the Baker-Berlusconi meeting productive. "We welcome the prime minister's statement supporting substantial debt reduction from Iraq in the Paris Club in 2004," he said.

Claims from Gulf Arab nations like Saudi Arabia, Kuwait, and the United Arab Emirates could amount to $45 billion -- more than is owed to the 19 Paris Club nations. The Gulf nations say this money was given in loans, while the Iraqis argue it was aid to fight Iran in the 1980s.

Baker is to meet British Prime Minister Tony Blair, the US's main ally in Iraq, today before making a potentially more difficult trip to see Russian President Vladimir Putin, a staunch war opponent.

Much of the estimated $8 billion owed to Russia is for arms sales to Saddam Hussein.

Analysts say Moscow is keen to ensure its interests in Iraq are recognized, especially contracts signed for developing huge oil fields in a country with the second largest oil reserves in the world.

According to a study by the US-based Center for Strategic and International Studies, Russia accounts for 90 percent of the $56 billion in pending Iraqi contracts signed during the Hussein era.

Russian officials were reticent ahead of Baker's meeting with Putin today. "Russia's position in regards to Iraq debt has not changed," said a Russian finance official, adding the issue should be solved within the Paris Club.

Saddam Hussein Saddam Hussein after his capture by US forces. (Reuters Photo)
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