Indebted Iraq Likely to Ask West for Loans

Eight years of war have turned Iraq into one of the Third World’s most heavily indebted nations, but President Saddam Hussein is expected to seek new Western loans if a cease-fire with Iran is approved.

Economists and political analysts said Western governments may extend new credit to boost influence in postwar Baghdad and support their companies’ bids for new contracts.

“If the war ends, the Iraqis will go down the road of asking for more credits and will hold out the carrot of lucrative contracts for companies,” a Middle East political analyst said.

“There is a strong lobby within the U.S. State Department that says Iraq has a great deal of economic potential and that since the United States will not play a role in supplying weapons, one way of gaining influence will be through trade,” another analyst said.

But they said Iraq’s history of late payments and debt reschedulings--playing off one creditor against another--will temper any enthusiasm.

Iraq was one of the Persian Gulf’s richest oil producers in 1980, with foreign reserves put at $20 billion. Now it is one of the world’s major-league debtors--owing foreign governments, banks and companies as much as $65 billion.

Used for Arms Purchases

The total is $10 billion more than Argentina’s current debt burden and by far the biggest debt in the Middle East.

The debt has financed huge arms purchases, building Iraq’s powerful Soviet- and French-equipped air force, and equipping an army of 1 million men and some 6,000 tanks.

Even though Iraq owes 10 times more than archenemy Iran, analysts believe that the West cannot ignore the nation, and its possible re-emergence as an economic power in the Middle East.

“It will be hard to resist, particularly if influence can no longer be won with day-to-day arms contracts,” said one analyst of the country’s requests.

If United Nations negotiations halt the Iran-Iraq fighting, Iraq will need billions of dollars to rebuild. Iraq’s daily oil output of 2.7 million barrels--the Organization of Petroleum Exporting Countries’ second highest--is not seen as enough to finance reconstruction in the current weak oil market.

Economists say the country is courting its main creditors, avoiding a wholesale rescheduling and granting preferential treatment to its most important lenders.

France, the United States and Britain have received fairly punctual debt repayments. France and the United States supplied Iraq with arms and grain, respectively.