$13 Billion for Iraq Exceeds Expectations but Falls Short

By Paul Richter

Oct. 25, 2003 12 AM PT

Times Staff Writer

MADRID —

Nations and international groups on Friday pledged about $13 billion in grants and loans to rebuild Iraq, despite misgivings about America’s unwillingness to share power over the mammoth construction project.

The aid, which will be combined with an expected $20 billion in U.S. grants, was more than American officials had predicted at the beginning of the month, but the total is less than the $56 billion needed. U.S. officials said that some of the promises made at a two-day conference might not pan out and some confessed disappointment that Persian Gulf states had not given more, despite U.S. pressure.

Of the $13 billion, between $6 billion and $9 billion is expected in loans from the World Bank and International Monetary Fund; most of the remainder will be in grants, a senior U.S. official said. As recently as two weeks ago, some U.S. officials were worried that the event might not raise more that $1 billion or $2 billion.

The aid “demonstrates that the international community is coming together to help the Iraqi people build a new nation, one that will be proud to rejoin the international community,” Secretary of State Colin L. Powell told representatives of 77 countries and 20 groups who met in a Madrid convention center. The money is earmarked for projects through 2007.

Bathsheba Crocker, co-author of a recent report on Iraq’s reconstruction, said that with the French, Germans and Russians and Persian Gulf states limiting their contributions, the giving did not signal “a major turnaround in support.”

A larger contribution by Iraq’s gulf neighbors would have signaled a growing international acceptance of the U.S.-led effort in Iraq.

Nevertheless, “it is a very decent number,” said Crocker, a foreign policy expert at the Center for Strategic and International Studies, a Washington think tank. She noted that an international fund-raising effort for Afghanistan’s rebuilding yielded only $4.5 billion, even though the U.S.-led reconstruction there had far broader international support.

Most of the grant money for Iraq came from Japan, which put up $1.5 billion for next year, and from Europeans, including members of the wartime “coalition of the willing,” such as Britain, Spain and Italy.

Though U.S. officials were happy to receive the loan offers, President Bush has argued strongly that burdening Iraq with more debts would endanger the country’s recovery. He has threatened to veto any U.S. legislation that sought to send loans, rather than grants, to Iraq.

The IMF has estimated Iraq’s debt to be $120 billion, not counting what the country owes as reparations for the 1990 invasion of Kuwait and the subsequent Persian Gulf War. Powell acknowledged the problem, saying U.S. officials “will be very sensitive to the debt burden that has been placed on the Iraqi people.”

Officials did not say whether they intend to forgive the $4 billion owed the United States. Treasury Secretary John W. Snow acknowledged that the debt problem is urgent, and he promised to work on a “significant reworking of debt levels.” The conference did not directly address the debt issue.

Powell said $15 billion would be provided by Iraqi oil sales, beginning in 2005, when the country’s oil fields begin generating more money than the government needs for day-to-day operations. And officials said they intended to call more conferences to raise some of the remaining $8 billion required to reach the $56 billion needed in the next four years.

A senior U.S. official said the administration was still scrambling to understand the details of the offers announced by dozens of countries Friday afternoon.

“There are lots of things here that still need to be checked out,” he said.

But he insisted that U.S. officials’ tally was “very conservative on all the numbers.” He said that in calculating the total, officials excluded export credits and money the countries had already given.

James Dobbins, who was special U.S. envoy to the Balkans in the late 1990s and, more recently, to Afghanistan, said he believed that the conference was “fairly successful,” given the continuing unhappiness of many nations that the United States has not shared more power over Iraq with other countries or the U.N.

Dobbins, now at Rand Corp., said that if the United States showed itself willing to share more power, “then maybe some of these offers can be upped.” He said that although loans may be a bad idea at the moment, they may be workable in two or three years, when Iraq has a fully functioning government.

Saudi Arabia said it was offering $1 billion, but half of it was in loans, and the other half in export credits.

The United Arab Emirates, one of the “core sponsors” of the event, said it was putting up $215 million. But it was unclear when that would be provided.

Iran said it would let Iraq export oil through its ports and would provide electricity and gas. But the terms of that offer weren’t clear. It said the spending of thousands of Iranian visitors to the country would bring in revenue for Baghdad.

South Korea promised $200 million, the European Union $812 million in 2004, and Canada $230 million. Most of Canada’s donation has already been spent.

Some officials urged countries to write checks as soon as possible, noting that often pledges from aid conferences don’t materialize.

“We know from previous experience that sometimes there is a lag, or more than a lag, between promises of help, and the arrival of help,” said Chris Patten, external affairs minister for the European Union. “We need to get the money out of the bank and into Iraq.”

Some countries were more willing to provide aid after officials agreed to create several international “trust funds.” These aid accounts will be overseen by international groups and thus will be outside most influence of U.S. authorities. Some nations that have opposed U.S. control in Iraq fear American authorities might misuse any money they were given, and accuse the Americans of failing to publicly account for how they are spending the funds they have.

It was unclear how much of the new money would go to the trust funds.

Some officials acknowledged concern that charity for Iraq, a country rich in natural resources, would shortchange other, needier countries that rely on international giving.

Foreign Minister Yoriko Kawaguchi of Japan said: “There are other countries which need assistance from us, and we are mindful of these countries.”

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What they promised

These are some of the largest economic reconstruction pledges for Iraq made before or during a donors conference in Madrid.

Japan -- $1.5 billion in grants for 2004.

European Union -- $812 million for 2004.

Kuwait -- $500 million, in addition to $1 billion already spent.

Saudi Arabia -- $1 billion in loans through 2007 and export credits.

Canada -- $230 million, most already spent.

United Arab Emirates -- $215-million grant.

South Korea -- $200 million over four years.

China -- $24.2 million.