ROBERT SMITH, host:
Add this to the list of problems faced by Iraq: it's in debt to its neighbors for billions of dollars. Saddam Hussein ran up his country's credit card for decades. Iraqi Prime Minister Nouri al-Maliki yesterday asked countries at a U.N. conference in Sweden to forgive all those loans.
Joost Hiltermann is with the International Crisis Group. He also consults with the United Nations on Iraqi matters. Good morning.
Mr. JOOST HILTERMANN (International Crisis Group; United Nations Consultant): Good morning.
SMITH: Well let's pull out Iraq's credit-card bill and go down some of the charges here. It looks like it's about $60 or $70 billion. Where did they get the money from, and what did they spend it on?
Mr. HILTERMANN: Well, most of the money, the $67 billion, is loaned from countries outside of the Paris Club. The Paris Club debt that Iraq has incurred has mostly been cancelled. But the $67 billion is mostly from Arab states, especially Gulf States: Saudi Arabia, $30 billion; Kuwait, $27 billion; and the other Gulf States, another $8 billion.
All this money was loaned to Iraq during the 1980s when Iraq was involved in a long war, major war, with Iran.
SMITH: And so why didn't Saddam pay this money back, just because he didn't have to?
Mr. HILTERMANN: Well, he wasn't really able to. The Iraqi economy was damaged heavily during the war, and it was in fact over the outstanding loan from Kuwait that Saddam Hussein invaded Kuwait. In the 1990s, Saddam Hussein was under sanctions. The regime was eventually allowed to pump enough oil to buy for food, but it didn't have the capability to repay these loans.
SMITH: So Iraq owes most of this money to Saudi Arabia and Kuwait. Now that Saddam Hussein is gone, why won't these countries just cut them a break?
Mr. HILTERMANN: Well they would want to do that if, in fact, they felt that the Iraqi government was friendly towards these Arab states, but they see instead that the Iraq government is more of a proxy of Iran. And so having supported Iraq during the war against Iran, now to cancel those debts would be a gift to the Iranians, whom the Arab states see in a way as the sort of belated victor in the Iran-Iraq War.
SMITH: Now how does international law work here? This is a completely different Iraq than the Iraq that ran up this debt. Can't they sort of, in effect, declare bankruptcy, say we're a new country, and we don't have to pay it?
Mr. HILTERMANN: Well perhaps, but the thing is these Arab states obviously want their money back. Either that or they want to have significant influence in Iraq. To the contrary, today they feel that they are excluded. I think they would be willing to cancel most of this debt - Saudi Arabia has certainly given signals in this respect - but at the moment, the distrust level between them and the Iraqi government is too great.
SMITH: Now, what is the United States saying through this whole conference? Is the United States encouraging these other countries to cancel these debts?
Mr. HILTERMANN: Very much so. The pressure from the United States has been intense over the past few years - it's not new at all - on the Arab states to cancel the debts, to cancel the Iraqi debts and to send their ambassadors to Baghdad. But these Arab states have been resistant to this idea because they don't like this government, they don't trust it and they see it as an Iranian proxy.
SMITH: With the rise in oil prices, it would seem that Iraq would have a lot of money right now from its oil sales. Couldn't it afford to pay back these loans?
Mr. HILTERMANN: Well, it could start to repay them. Probably, debts would have to be rescheduled. But Iraq could start repaying these debts. It doesn't even know how to spend the surplus to its budget that it has earned over the past couple of years due to the high oil prices.
SMITH: It makes it a little hard to ask for debts to be canceled when these countries know that you've got money in the bank.
Mr. HILTERMANN: It doesn't do much for your leverage. That's right.
SMITH: Thank you very much.
Mr. HILTERMANN: My pleasure, thank you.
SMITH: Joost Hiltermann is deputy director of the International Crisis Group's Middle East and North Africa Program. He spoke to us this morning from Istanbul, Turkey.
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