Lebanese firms seek Iraqi debt settlement

06 August 2013

BEIRUT: Lebanon and Iraq are starting negotiations toward settling more than $900 million of private sector debt owed by the Iraqi state to Lebanese companies since the 1980s, but the process is expected to take time before the issue is resolved. “The Iraqi side, and particularly Prime Minister Nouri al-Maliki is for the first time showing serious concern and dispatched a senior Iraqi Finance Ministry official to Beirut last month to follow up on the subject,” said Chakib Chehab, a member of a committee tasked by the Beirut Chamber of Commerce to follow up on the issue with Iraqi authorities.

The Iraqi dues date back to the era of ousted President Saddam Hussein, whose government negotiated trade contracts with Lebanese companies.

The dues that are easiest to collect date back to before 1990, when international sanctions were not yet enforced on Iraq, Chehab said.

The United Nations Security Council imposed in 1990 comprehensive sanctions on Iraq following its invasion of Kuwait that same year. It also created the United Nations Compensation Commission, which assessed damages suffered as a direct result of Iraq’s occupation of Kuwait.

The sanctions mainly restricted the items that could be imported into Iraq, and exporters were required to apply for export licenses assessed by the U.N. sanctions committee.

In 1995, the Security Council established the Oil for Food Program and began implementing it the following year. Under the Oil for Food Program, Iraq was permitted to sell $2 billion worth of oil every six months; the limit was raised to $5.26 billion and eventually it was removed in the late 1990s.

Some of the trade agreements between Lebanese companies and the Iraqi government circumvented U.N. sanctions, and experts say the debt ensuing from such contracts will be hard to collect.

“Part of the dues are the result of trade agreements outside the framework of the U.N. sanctions,” Chehab told The Daily Star. Chehab added that dues relating to these contracts would be hard to collect.

When asked to roughly estimate the value of such contracts, Chehab said it was hard to give any numbers.

In addition to unsettled debts, dues owed to Lebanese companies include damages incurred by Lebanese firms operating in Iraq and Kuwait during the successive wars.

Another challenge facing Lebanon’s effort to collect its debt is the Paris Club’s 2004 agreement in which 19 creditors wrote off 80 percent of the $38.9 billion that Iraq owed them.

“Lebanese companies have rejected such a settlement, and we are seeking to restore the majority of our rights,” Chehab said.

Chehab said Iraq was concerned that other creditors might demand the same treatment should it repay more than 20 percent of its debts to Lebanon.

A clause in the agreement gives the Paris Club the option to suspend part of the debt reduction if it is not matched by Iraq’s Arab creditors.

But both Chehab and the head of the committee, Abdel-Wadoud Nassouli, insist that Lebanon will be seeking the full amount.

“Lebanon has dealt very positively with Iraq and never seized Iraqi assets or deposits, and we didn’t even file lawsuits,” Nassouli said. “Positivity should be met with positivity.”

Nassouli added that a significant part of the dues were in the form of Lebanese deposits in Iraqi banks, which companies attempted to withdraw; they failed to complete the transfers because of international sanctions.

Nassouli called on the Lebanese government to intervene on behalf of Lebanese companies, many of whom had to take out loans to finance their trade transactions with Iraq.

© Copyright The Daily Star 2013.


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