US urges Arab states to use oil profits for Iraq

WASHINGTON - Arab nations should use some of their windfall profits from high petrol prices to help rebuild Iraq and forgive most of the US$40 billion ($64.76 billion) in debt owed to them by Baghdad, a senior US official said on Thursday.

The State Department's Iraq coordinator, James Jeffrey, told lawmakers the Bush administration had been campaigning to get Arab states such as Saudi Arabia and Kuwait to follow through on pledges to help rebuild Iraq and to forgive debt.

"They understand that reconstruction and stability in Iraq is absolutely critical and they are the beneficiaries of large windfall profits (from high oil prices)," Jeffrey told a hearing on Iraq reconstruction at the House of Representatives International Relations Committee.

Oil prices have soared in recent months to more than US$70 a barrel, due partly to the violence in Iraq and concerns Iran could turn off the taps in its dispute with the West over its nuclear intentions.

Jeffrey said he had travelled to the Gulf region several times to appeal directly for more aid and for debt forgiveness from Arab nations as had Secretary of State Condoleezza Rice.

"The president feels exactly the same way and he has charged us to get this debt removed," said Jeffrey, when pushed by lawmakers who said the Bush administration was not putting enough pressure on Arab nations.

Jeffrey said one reason Arab nations had not come forward with significant amounts was because they had been waiting to see if a stable political system could be established in Iraq.

"We have obtained that and so I can give you no further reason why it could not move forward," he said, referring to the formation of Iraq's elected government.

Gulf Arab states are owed about US$40 billion by Iraq, with the bulk of the debt owed to Saudi Arabia and Kuwait and Jeffrey urged them to follow the lead of the Paris Club of creditors and forgive 80 to 100 per cent of that money.

Iraq's main creditors at the Paris Club of wealthy nations agreed in November 2004 to cancel 80 per cent of Baghdad's debt to them in three steps over four years.

The Paris Club's 19 members include the United States, Japan, Canada, Germany, Britain, France and Italy, as well as other Western European states, Russia and Australia.

Lawmakers complained the United States was left to shoulder the bulk of the reconstruction effort in Iraq while its oil-rich neighbours held back. The United States has pumped more than US$20 billion into Iraq's reconstruction.

"If the American taxpayer would know that Arab countries which are getting billions in windfall oil profits are not meeting their puny obligations to participate in the reconstruction of their fellow Arab nation of Iraq, they would be outraged," said California Representative Tom Lantos, the ranking Democrat on the committee.

About US$13.5 billion was pledged at a donors conference for Iraq in Madrid in October 2003 but only about US$3 billion of that had been disbursed so far, said Washington's special inspector general for Iraq reconstruction, Stuart Bowen.

Bowen's latest report on Iraq reconstruction said Kuwait was involved in "small-scale" humanitarian programmes in the south but had not moved much of its US$565 million pledge and Saudi Arabia and the United Arab Emirates were holding off.

- REUTERS