Iraqi Debt and the Carlyle Group

international | anti-war / imperialism | other press Wednesday October 20, 2004 12:43 by Slarti

James baker, Madeleine Albright et al up to their usual tricks

"President Bush's special envoy, James Baker, who has been trying to persuade the world to forgive Iraq's crushing debts, is simultaneously working for a commercial concern that is trying to recover money from Iraq, according to confidential documents."

"Mr Baker's Carlyle Group is in a consortium secretly proposing to try to collect $27bn (£15bn) on behalf of Kuwait, one of Iraq's biggest creditors, by using high-level political influence"

"Yet Iraq continues to make regular reparations payments for Saddam's 1990 invasion of Kuwait. In the eighteen months since the US invasion, Iraq has paid out a staggering $1.8 billion in reparations--substantially more than the battered country's 2004 health and education budgets combined, and more than the United States has so far managed to spend in Iraq on reconstruction."

Selected highlights from
http://www.thenation.com/doc.mhtml?i=20041101&c=1&s=klein
http://www.guardian.co.uk/Iraq/Story/0,2763,1326037,00.html

"Chris Ullman, Carlyle's spokesman in Washington, said that the firm was aware that a $1bn investment for Carlyle was part of the Kuwait proposal: "We were aware of that. But we played no role in procuring that investment."

"So you were willing to take the billion but not to try to get it?" He answered: "Correct" "

...

"Yet Iraq continues to make regular reparations payments for Saddam's 1990 invasion of Kuwait. In the eighteen months since the US invasion, Iraq has paid out a staggering $1.8 billion in reparations--substantially more than the battered country's 2004 health and education budgets combined, and more than the United States has so far managed to spend in Iraq on reconstruction.

Most of the payments have gone to Kuwait, a country that is about to post its sixth consecutive budget surplus, where citizens have an average purchasing power of $19,000 a year. Iraqis, by contrast, are living on an average of just over $2 a day, with most of the population dependent on food rations for basic nutrition. Yet reparations payments continue, with Iraq scheduled to make another $200 million payout in late October. "

...

"The consortium also has a detailed plan to address the perception that reparations are "diverting resources from rebuilding Iraq to a more wealthy neighbor." First, Kuwait must assign its unpaid debts from Iraq to a private foundation controlled by the consortium. The foundation will manage an investment fund that will invest a portion of reparations payments from Iraq to Kuwait back into Iraq. As examples of the types of investments the foundation would make, Albright, Huebner and Sheikh suggest in their letter that the reparations funds could be used to buy Iraq's state-owned companies. "In the near future, 40 state-owned Iraqi enterprises in a range of sectors will be available for leasing and management contracts," they write. By demonstrating that Kuwait is investing part of its reparations proceeds back into Iraq's economy, the consortium-run foundation "establishes a humanitarian rationale for the United States and other countries to continue their support" for the reparations. The consortium appears to see privatization--a highly controversial proposal in Iraq--as part of a humanitarian mission."

...

"A case can certainly be made that James Baker and Madeleine Albright have had more direct influence over Iraq's debts and reparations payments than any politicians outside Iraq, with the possible exception of the forty-first and forty-third Presidents of the United States.

As Secretary of State, Baker played a role in running up Iraq's foreign debts in the first place, personally intervening in 1989 to secure a $1 billion US loan to Saddam Hussein in export credits. He was also a key architect of the first Gulf War, as well as of the cease-fire that required Saddam to pay such sweeping reparations. In his 1995 memoirs, The Politics of Diplomacy, Baker wrote that after seeing the oil-well fires in Kuwait he cabled President George H.W. Bush and said, "Iraq should pay for it." Now, through the consortium, Carlyle could end up controlling $1 billion of those payments.

The role of the Albright Group raises similar questions. As Secretary of State and Ambassador to the UN, Madeleine Albright participated personally in drafting UN Resolution 986, which created the oil-for-food program, diverting 30 percent of Iraq's revenue from oil sales to war reparations. "It's a great day for the United States because we were the authors of Resolution 986," she said on The NewsHour With Jim Lehrer on May 20, 1996. Now, as a private citizen, Albright is a leading member of a consortium that is exploiting her connections to try to profit from the very reparations she helped secure. Albright also enforced the brutal sanctions campaign against Iraq, one of the effects of which was the hobbling of Iraq's state companies. Now, she is part of a plan to use Iraq's reparations payments to buy the very firms that her sanctions program helped to debilitate.

But it is Baker's envoy post that raises the most serious questions for the White House, especially because a Special Presidential Envoy is the President's personal representative, meeting with heads of state in the President's stead and reporting back directly to the President. If a President's envoy has a conflict of interest, it reflects directly on the highest office. Clark says, "There is absolutely a conflict of interest. Baker is aligned with two parties--the US government and Carlyle--that are not aligned with each other."

As envoy, Baker's job is to do his best to clear away Iraq's debts, lessening the burden on Iraqis and on US taxpayers. Yet as a businessman, he is an equity partner in a company that is part of a deal that would achieve the opposite result. If Baker the envoy succeeds, Baker's business partners stand to fail--and vice versa.

Have these conflicts influenced Baker's performance as envoy? Has he pushed as hard as he could have for debt forgiveness? We know that Iraq's steep war reparations to Kuwait have largely escaped public scrutiny--if Baker has steered the Bush Administration away from the reparations issue, for whom was he working at the time? The White House? Or Carlyle? Clark says questions like these are precisely why conflict-of-interest regulations exist. "We have reason to doubt that Baker is doing everything he could be doing on behalf of the United States because he has an interest in another side of the transaction." "

...

"Busy negotiating the rules of the presidential debates, Baker has been MIA on the debt issue. Since he returned from his trip to the Middle East in January, the President's envoy has issued only two public statements on Iraq's debt, and he has been completely silent on the topic for the past six months--despite having publicly committed to getting the debt issue sewn up by the end of the year.

While this is bad news for Iraqis and for US taxpayers, it could be good news for Carlyle. A swift resolution to Iraq's debt crisis works against its financial interest: The longer the negotiations drag on, the more time the consortium has to convince the reluctant Kuwaiti government to sign on the dotted line. But if Iraq's debt is successfully wiped out, any proposed deal is off the table.

Baker's position as envoy has certainly been useful to his colleagues in the consortium. Whether Baker has helped solve Iraq's debt crisis is far less clear. "