The UAE shows its belief in Iraq’s future

• Last Updated: July 06. 2008 8:45PM UAE / July 6. 2008 4:45PM GMT

Nouri al Maliki, the prime minister of Iraq, has made significant progress in the past months towards rebuilding his war-torn country. Security in Iraq has improved considerably, deaths of Iraqi and US soldiers have fallen. Infrastructure projects including vital improvements to the oil industry continue, albeit slowly. And, crucially, it appears that political reconciliation between Sunnis and Shiites is progressing. The prognosis for Iraq looks better on a daily basis, but much remains to be done.

One of the many factors still hampering Iraq’s reconstruction is a crippling level of foreign debt incurred under the regime of Saddam Hussein. At the time of the US invasion of 2003, the country owed an estimated $120 billion (Dh440 billion) to countries around the world. Since the start of its occupation, the US has campaigned to have that debt erased. It succeeded in wiping out $63.3 billion (Dh230 billion) owed to members of the Paris club (a group of major creditor nations including the G7 and Russia) in 2004. China, not a member of the Paris club, agreed to cancel “a large margin” of the $8 billion owed to it by Iraq. GCC nations, who are owed the most of Iraq’s remaining $67 billion of debt, have been reticent to write off the complete amount. Saudi Arabia is owed the vast majority of this amount.

While GCC nations have agreed in principle to reduce substantially Iraq’s debt, little progress has been made until now. Kuwait, who suffered most when Iraq invaded in 1991, is loathe to relinquish any of the debt or reparations it is owed. While Saudi Arabia admirably promised last year to forgive 80 per cent of the amount it is owed, it has not formally written off the debt. Until yesterday, Iraq had not received any of the desperately needed relief from its neighbours.

However, when Mr Maliki arrived in the UAE on Sunday he was greeted with two long awaited pieces of good news. Sheikh Khalifa bin Zayed, the president of the UAE and ruler of Abu Dhabi, announced that Iraq’s entire debt to the UAE would be forgiven. With interest and penalties, that amounts to $7 billion (Dh26 billion). After the US, the UAE is the only nation to agree to cancel the full debt.

The other piece of welcome news for Mr Maliki is the naming of the UAE’s new ambassador to Iraq, the current ambassador to India, Abdullah Ibrahim al Shehhi. The announcement follows the Foreign Ministry’s promise in June that the embassy in Baghdad would be reopened soon.

Currently, Iraq spends five per cent of its oil revenues to repay foreign debts. This amount, divided between all the debtor nations is insignificant – but can make a large difference to the people of Iraq. Hopefully the rest of the GCC will follow the Emirate’s example and reward Iraq for the progress it has made in recent years. A prosperous Iraq will benefit the whole Gulf.