U.S. Frees Kuwaiti Assets for Paying Bills

The U.S. government is freeing frozen Kuwaiti assets to allow the country’s government-in-exile to pay for official expenses and, almost certainly, to reimburse Turkey for the heavy economic losses expected from that nation’s trade embargo against Iraq.

“We have already freed up the money for them to do their own government business,” said Barbara Clay, a spokeswoman for the U.S. Treasury Department. The Treasury is in charge of enforcing the freeze on Kuwaiti assets in the United States.

Clay declined to elaborate on how the money may be used. But one U.S. government source said that what constitutes official business was largely being left up to the Sabah family, the longtime rulers of Kuwait, who were forced to flee after Iraq invaded Kuwait on Aug. 2. The source said the United States is unlikely to object to using funds to aid Turkey.

Turkey is expected to lose up to $3 billion a year as a result of the sanctions it agreed to impose on neighboring Iraq.

Crown Prince Saad al Abdullah al Sabah, the exiled prime minister of Kuwait, reportedly met Tuesday in Ankara, Turkey, with Turkish President Turgut Ozal and Prime Minister Yildirim Akbulut. According to wire service accounts, Saad promised that Kuwait will reimburse Turkey for losses sustained as a result of sanctions imposed on Iraq. These include shutting down a vital oil pipeline that carried Iraqi oil to a Turkish port.

Turkey could lose $300 million annually in transit fees and port duties alone from shutting down the Kirkuk-Yumurtalik pipeline, which carried more than half of the Iraqi oil exports. In addition, Iraq was Turkey’s second-biggest trading partner, and Turkey received about 60% of its own oil imports from Iraq.

Details of Saad’s reported agreement to reimburse Turkey were not immediately known. Officials did not say whether a specific amount of money had been agreed to, or a schedule for payment.

In a telephone interview, Daryal Batibay, the charge d’affaires at the Turkish Embassy in Washington, said Tuesday that he had not yet been informed of the details of the Ankara agreement.

The United States, Britain and other countries froze Kuwaiti assets following the Iraqi invasion. U.S. Treasury officials noted that the primary purpose of the freeze is to prevent Kuwaiti funds from being used to benefit Iraq.

For more than 30 years, Kuwait has invested abroad much of the profits from its oil production. Kuwaiti assets worldwide are believed to be well over $100 billion. In recent years, the country’s revenues from global investments exceeded its income from domestic oil production. Sharif Ghalib, a senior analyst at the Institute of International Finance in Washington, estimates that Kuwait state funds invested in the United States total between $15 billion and $20 billion.

Nadav Safran, a Middle East expert at Harvard University, said it was logical for the exiled Kuwaiti rulers to want to pay Turkey. “For Kuwait, this is peanuts,” he said. “When what is at stake is ownership of the state and $15 billion a year (in oil revenues), then paying Turkey is like paying a bodyguard to fend off a robbery.”

Clay, the Treasury spokeswoman, confirmed that the Kuwaiti government-in-exile already has been allowed to use frozen funds to pay for the continuing operations of the Kuwaiti embassy in Washington.

It could not be learned immediately under what circumstances Britain will allow the deposed Kuwaiti rulers to use funds frozen in that country. The Kuwaiti government also invested heavily in Britain and owns a significant stake in the oil company British Petroleum.

Saudi Arabia reportedly offered Tuesday to help supply Turkey with oil at a favorable price, to replace the oil it imported from Iraq.

Staff writer James Flanigan, in Los Angeles, contributed to this story.