Iraq Country Analysis Brief

GENERAL BACKGROUND

In the aftermath of war in March and April 2003, Iraq now finds itself in a period of uncertainty and transition after more than three decades of Ba'ath party rule. The events of 2003 mark the latest upheaval which Iraq has faced in its recent history. During the 1980s and 1990s, for instance, Iraq experienced two major wars (Iran-Iraq and the Kuwait war of 1990/1), plus more than a decade of economic sanctions. As a result, the country's economy, infrastructure, environment, health care system, and other social

indicators all deteriorated sharply.

Iraq also assumed a heavy debt burden, possibly as high as $116 billion if debts to Gulf states and Russia are counted, and even more if $250 billion in reparations payment claims stemming from Iraq's 1990 invasion of Kuwait are included. It is possible, however, that much of Iraq's debt will be written off in the end, and that reparations will be capped at a certain level, possibly around $40 billion. In December 2003, former U.S. Secretary of State James Baker was sent as an envoy to several of Iraq's major creditor nations, attempting to secure pledges to write off some of Iraq's debt. Russia stated that it would be willing to write off part or all of the $8 billion it is owed in exchange for favorable consideration for Russian companies on Iraqi oil and reconstruction projects. In January 2004, Kuwaiti Prime Minister al-Sabah announced that his country would be willing to waive some of the $16 billion owed by Iraq, and would help reduce Iraq's overall foreign debts as well