G7 pact gets Iraq aid started, avoids detail

3.00pm

WASHINGTON - A weekend pact among global finance chiefs to seek a new United Nations resolution on rebuilding Iraq may speed the mobilisation of aid but may not resolve the tricky question of who will lead the effort.

US Treasury Secretary John Snow, who met Friday and Saturday with Group of Seven finance ministers and central bankers, was able to say afterward the World Bank can now begin to study Iraq's needs.

However, the broad agreement by the G7, which comprises the United States, Britain, Canada, France, Germany, Italy and Japan, on a new UN Security Council resolution was so vague as to be open to nearly any interpretation.

This means the weekend's burning question -- whether the UN or the international financial institutions will spearhead the Iraq rebuild -- may not yet be answered.

The G7 met on the sidelines of spring meetings of the World Bank and International Monetary Fund.

"We recognize the need for a multilateral effort to help Iraq," a communique on Saturday said. "We support a further UN Security Council resolution."

Political tensions were high going into the meeting, with the United States pressing for the bank and the fund to drive the reconstruction of shattered Iraq while Britain, Germany, France and Russia said the effort must be led by the UN.

The lenders themselves signaled last week they did not want to be drawn into the political wrangle, saying they were willing to help but only if all their country shareholders told them to -- including those pushing for a UN lead.

Partly at issue is what some analysts have called "the spoils of war," billions of dollars in infrastructure contracts which each country is keen to have some share in.

No one has produced a definitive cost figure for Iraqi reconstruction, but some estimates range as high as $20 billion a year for several years on projects from schools and roads to modernizing its oil-pumping capacity.

The G7 deal to back a new UN resolution, undefined as it is, effectively skirts that potential roadblock and also let Snow say the World Bank can get on with the job. He told the IMF later Iraqis "have waited long enough" for aid.

Analysts said the deal was a significant and helpful development from the meetings, which normally are more preoccupied with issues of how to boost global economic growth than political matters like Iraq.

"The most important outcome seems to have been some rapprochement, with a coming-together of the industrialized countries after the division that marked the period before the Iraqi war," said economist Lynn Reaser of Banc of America Capital Management Inc in St Louis, Missouri.

Even if the roles of the respective global agencies are still not defined, and even if the United States ultimately ends up in the driver's seat, at least there was some effort to present it as something other than solely US-led, she said.

"We agreed that the international financial institutions ... should provide technical assistance, should lend their expertise in Iraq and should undertake a preliminary needs assessment study," Snow said.

German officials, speaking on condition of anonymity, said later it wasn't clear what the United States envisions in a new UN resolution and said Snow's main goal seemed to be securing a cooperative approach from allies on Iraqi rebuilding.

However, the officials from Germany, which has had strained relations with the Bush administration because of its opposition to war, was cautiously optimistic the United States was willing to work toward a co-operative rebuild effort.

US officials took pains to say they were making no concessions by agreeing to back a UN resolution, saying they had gone no further than President George W Bush had in talks with British Prime Minister Tony Blair in Northern Ireland earlier in the month.

In a statement after that meeting, the two said they would seek a new UN resolution to "affirm Iraq's territorial integrity, ensure rapid delivery of humanitarian relief and endorse an appropriate post-conflict administration for Iraq."

However, there were signals the administration is not eager to hand over a commanding role to the UN.

Secretary of State Colin Powell said in Brussels earlier this month after meeting European Union and Nato allies that the UN's role was yet to be decided and that the United States and Britain should lead the transition from a military administration to an Iraqi-run government.

"There will definitely be a UN role but what the exact nature of that role will be remains to be seen," Powell said, later telling a French newspaper: "The desirable role for the United Nations must be worked out. It should administer humanitarian aid and give its blessing to the temporary authority that will be appointed (in Iraq)."

- REUTERS

Herald Feature: Iraq war