Wary Saudis Withhold Aid to Iraq

Saudi Arabia will withhold the $1 billion in loans and credits that it pledged last month for Iraq’s reconstruction until the security situation is stabilized and a sovereign government takes office, U.S. and Saudi officials said.

The Saudi decision is a setback for the Bush administration, which had hoped that the kingdom would set an example for other Arab governments by providing vitally needed aid. At an international donors conference in Madrid in October, Saudi Arabia pledged to give Saudis willing to do business in Iraq $500 million in loans and $500 million in export credits over the next five years. The U.S. hailed the commitment.

But Baghdad won’t be counting Saudi cash any time soon, according to Saudi and U.S. officials. The money “can’t go anywhere until there can be actual movement toward development,” said a Saudi official, referring to the military and political instability in Iraq.

The Saudis’ reluctance underscores how the mounting violence in Iraq is feeding a deep ambivalence among Arab governments about the rebuilding effort, Arab diplomats in Washington said. The deadly insurgency that U.S. officials say is being mounted by remnants of Saddam Hussein’s deposed regime and foreign militants has already forced international aid agencies to decrease their staffs in Iraq.

In a gesture of support, Arab governments have provided humanitarian assistance and begun rebuilding economic ties with Baghdad. Despite their publics’ unhappiness with the U.S. presence, they also have taken the first steps toward recognizing the U.S.-picked Iraqi Governing Council.

But some governments have dragged their feet on securing their borders to prevent militants from entering Iraq. They have been slow to respond to the Governing Council’s pleas for a quick return of billions in Iraqi cash smuggled out by the former regime. And they have continued to hang back when Washington has asked for cash and military assistance.

“The first thing [regional governments] need to do is stop messing things up,” said one senior U.S. official, speaking on condition of anonymity.

American officials have accused non-Arab Iran of being the most egregious offender when it comes to letting militants pass through its territory, but Syria, Yemen and Saudi Arabia also could do more, U.S. officials said.

U.S. officials say the ambivalence of regional governments reflects in part their fears that shifting U.S. plans for Iraq may produce a weak and divided state, the first Shiite-led Arab state or the most democratic state in the Arab world -- all unsettling prospects for the region’s authoritarian regimes.

While some governments have “started to take some steps, too many have stood on the sidelines, criticizing the United States and remaining mute on the topic of the interim Governing Council,” said another U.S. official, who also spoke on the condition that he not be named.

U.S. officials said that Arab regimes “resigned themselves to the idea that the U.S. will be in Iraq for a while,” said one official. “But there are suspicions ... there are misgivings.”

For these governments “it is troubling to be asked to cooperate, when it’s so unclear which path the United States is following,” said Khalid Dakhil, a professor at King Saud University and a visiting scholar at the Carnegie Endowment for International Peace in Washington.

Economic ties between Arab states and Iraq could do more to restore Iraq than the billions the U.S. plans to pour into the country, experts said. But if Arab states turn against the effort, they could jeopardize reconstruction and weaken U.S. efforts to fight insurgents or build an Israeli-Palestinian peace.

U.S. officials continue to try to make the case to Arab regimes that a stable, prosperous, democratic Iraq is in their interest.

“We all have a stake in seeing reconstruction succeed. But I think neighbors of Iraq have a particularly high stake in having this work out,” said Alan P. Larson, U.S. undersecretary of State for political and economic affairs. “They will be the ones who, if Iraq is a prosperous democracy, will stand to benefit. If Iraq is an unstable, declining economic neighbor that at times is threatening to its neighbors, they will be the first to suffer as a result of that.”

For many in the Arab world, any support for the U.S.-led occupation of Iraq is remarkable. A nation considered a wellspring of Arab civilization is now patrolled by about 130,000 U.S. soldiers, in what to many ordinary Arabs “looks like another step in the American war against Islam,” said one Arab diplomat, speaking on condition that he not be named.

Arab television broadcasts regularly juxtapose images of Israeli troops patrolling the West Bank with U.S. soldiers firing at insurgents in Iraq. In some Arab countries, approval of the United States has plunged to the single-digit range in the past year, polls show.

Nevertheless, governments in the region have allowed representatives of the Iraqi Governing Council to take part in meetings of the Arab League, OPEC and the Organization of the Islamic Conference. Governments don’t have full diplomatic relations with the Governing Council, yet Egypt recently received its interim foreign minister.

And some have cooperated in other ways. Saudi Arabia and Jordan have set up large field hospitals in Iraq; the Saudis have built water purification plants and have been flying Iraqis with severe medical problems to hospitals in their country.

Non-Arab Turkey has reopened a lifeline, allowing the regular flow of trucks, and has been boosting Iraq’s power supply with 1 billion kilowatts of electricity, in exchange for Iraqi oil. Jordan, which with Kuwait is the Arab regime most openly supportive of the new order, has agreed to provide facilities for the training of up to 1,500 police a month.

Yet American and Iraqi leaders are urging regional governments to do much more.

Iyad Allawi, one of the nine rotating presidents of the Governing Council, said a top priority is to get the return of what he believes is billions in assets illegally spirited out of the country by members of Hussein’s regime and now held in countries such as Kuwait, the United Arab Emirates, Saudi Arabia, Jordan and Syria.”This is cash that is available now in banks, as we speak,” Allawi said in a recent interview.

Arab officials say that in some cases the money clearly belongs to Iraqis and should be returned. In other cases, foreign businesses say the money was sent to them as payment for legitimate purchases and belongs to them. It will take time to figure out the claims.

It remains to be seen how much money will be sent to Iraq, and how soon, from the international donors conference held in Madrid. At the close of the conference, attended by 73 nations, the U.S. said that $13 billion had been pledged in grants, in-kind services and other assistance.

But so far, no checks have been written to make good on the pledges, said one U.S. official, since an international trust fund for the money has yet to be put in place.

U.S. officials said they also haven’t given up trying to persuade Arab governments to send troops as peacekeepers in Iraq. None, however, has been willing to send even military medical units or military police.

And there have been some overt diplomatic snubs.

One occurred during a recent Arab ministerial meeting in Damascus, where Syrian officials invited the Iraqi Governing Council to attend just one day before the meeting began. “There was a lot of suggestion it was an intentional slight,” said a U.S. official.

Although the U.S. and Saudi governments have been drawn together by recent terrorist bombings in the Saudi kingdom -- and one Saudi official insisted that “our goal is to help any way we can, short of sending troops” -- the Saudis continue to resist pressure to give cash grants. Part of this “is ideology: oil producers just don’t see why they should be giving money to another large producer,” said Edward S. Walker, who is president of the Middle East Institute in Washington and a former senior State Department official.

A further source of friction is the looming question of Iraq’s crippling foreign debt, estimated at about $300 billion to $400 billion. The U.S. would like to see nations forgive much of that debt, arguing it is a necessary step to ensure than an emerging democratic regime in Iraq will have financial stability.

Iraq owes about $50 billion to Saudi Arabia, Kuwait and other Arab nations, and they are loathe to forgive that debt.

“These obligations are real,” said one Arab diplomat, speaking on condition of anonymity.

A senior U.S. official said he expects an international agreement on the debt next year, with Arab countries participating. “It’s now a front-burner issue,” he said.