x Abu Dhabi, UAEWednesday 26 July 2017

Kuwait may write off billions in loans to Iraq

Minister will forgive Iraqi debt despite voicing concerns over stability from terrorism threat from across the border.

KUWAIT CITY // Kuwait will forgive billions of dollars of Iraqi debt in exchange for guaranteed security and good relations with its northern neighbour, the minister of foreign affairs, Sheikh Mohammed Sabah Salem al Sabah, said this week. "We do not want money, and we did not ask you for that. All that we need is security and peace," Sheikh Mohammed said in an interview with the local newspaper Al Qabas on Sunday.

Iraq owes Kuwait US$16 billion (Dh58.8bn) from loans that were mostly made during the 1980s when Saddam Hussein's regime was fighting a war with Iran. The Iraqi government owes an additional $25bn in war reparations to Kuwait as a result of the 1990 invasion. Sheikh Mohammed said he was referring only to the money owed to Kuwait through loans, and not compensation, which he said has its own "international mechanism".

The UN Compensation Commission oversees payments to individuals, companies, non-governmental organisations and governments that suffered in the invasion. Five per cent of the country's oil sales are used as compensation, and Iraq must resolve the reparations issue before it can be relieved of the UN's remaining sanctions. During the interview, the minister also expressed concern that tribal and sectarian divisions in Iraq and problems with al Qa'eda terrorists could spill over the border to threaten stability in Kuwait.

Yousef Ali, the director of Kuwait University's Centre for Strategic and Future Studies, said because Kuwait is a small state abundant with oil fields, it has often been coveted by the larger and more powerful countries in the region, Saudi Arabia, Iran and Iraq. He said it had paid off its neighbours to avoid confrontation in the past, and Iraq benefited from this policy in the 1960s. Mr Ali said he believed the threat from Iraq had increased in recent years because of instability there. The Kuwaiti government would be willing to forgive both the debts and reparations if it could overcome opposition from some members of parliament, he said.

"It depends if the government can convince the religious extremists - like the Salafis - to accept it. Some of their MPs will resist the idea," Mr Ali said. He said the change of Iraqi leadership from Saddam Hussein's Sunni-dominated regime to a democracy where Shiites are the largest bloc had put many radical Kuwaiti Sunnis off the idea of giving the country a break. "This is their attitude. In any country if there are some Shiites in government, those fundamentalists try to put pressure on them. Take Lebanon, take Bahrain and now take Yemen," he said.

Mr Ali said Kuwait, Iraq and the UN all agreed to the demarcation of the border between the two countries after the Iraq war, but some Iraqi nationalists still do not accept the deal. Some Iraqi MPs have questioned the validity of the border, and others have demanded that Kuwait pay Iraq compensation for giving the US-led coalition a base from which to stage the 2003 invasion, which they said was illegal under international law.

Sheikh Mohammed gave a warning to belligerent Iraqi MPs during the interview when he said: "The positions of some Iraqi officials towards Kuwait do not encourage writing off debts." Relationships between the two countries are not always acrimonious. A visit from the governor of Basra to Kuwait on Sunday highlighted the hopes many businessmen in the two countries have for increased economic cooperation.

"Iraq is keen on extending bridges of amity and friendship with the state of Kuwait," the Iraqi governor, Shaltagh al Mayah, told journalists at a press conference with the governor of Ahmadi, Sheikh Ibrahim al Duaij al Sabah. The Iraqi governor said his visit was to promote brotherly ties and joint interests between the northern Gulf neighbours and urged Kuwaiti companies to invest in Basra because it was witnessing a period of increased security and stability.

The Kuwaiti MP who heads the Kuwait Economic Society, Rola Dashti, has hinted that investing Iraqi payments back into the country would be a suitable compromise to the reparations issue that would benefit both countries. Sheikh Mohammed said the UK, Turkey and Kuwait were now working together to establish a free trade zone in Basra. Another member of the Iraqi delegation from Basra, Nezar al Jebari, announced yesterday that authorities have selected a plot of land in the Basra governorate to build a hospital that will be funded by the Kuwaiti government.

jcalderwood@thenational.ae