Iraq wheat debt to be largely forgiven

By BELINDA GOLDSMITH in Canberra

Australia will forgive most of a US$500 million debt owed by Iraq for wheat purchases as it looks to rebuild one of its most important markets for grain, says Trade Minister Mark Vaile.

Vaile said yesterday that it was highly unlikely war-torn Iraq would ever be able to repay over US$150 billion of debts it owes around the globe or its full debt to Australia that stemmed largely from wheat sales from three harvests before 1990.

But he said Australia, a leading agricultural exporter, would write off most of its debt and help rebuild the grain industry in Iraq, which imports about 2 million tonnes of wheat a year.

"We want to look to the future of Australia being a major supplier to one of the most important markets we trade to," Vaile said.

The Government has yet to decide how much of the debt to forgive but Vaile said it would be the majority. He assured growers, however, that the Government would pursue the rest.

As part of the package, Vaile said the Government had also committed to contributing A$20 million ($14 million) to help build a grain storage and milling plant in Iraq, subject to its feasibility being proved.

Monopoly wheat exporter AWB said the Australian wheat industry's position in the international wheat market would be boosted by the investment, which would provide an avenue for Australia to retain and grow the Iraqi wheat market.

But growers would be disappointed by the decision to forgive the debt, even though the decision was understandable given the situation in Iraq and might assist in the long-term development of the country and its wheat market.

The debt relates to sales by the Australian Wheat Board between 1987 and 1990.

The outstanding amount was US$480.4 million, although sales were insured to a maximum of 80 per cent through Government insurer EFIC, which previously paid that amount to growers.

The balance owed to growers was $98 million.

Australia dominated Iraq's wheat market during the years of Saddam Hussein, exporting up to 2 million tonnes of the grain a year to the country after Baghdad authorities refused to buy US wheat after the Gulf War of the early 1990s.

Australia is the world's second-largest wheat exporter after the United States.

Australian grain growers welcomed the announcement to forgive most of Iraq's debt, despite acknowledging it was now unlikely they would receive the $100 million they were owed.

- REUTERS

Herald Feature: Iraq