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THE WORLD

Donors Unlikely to Bridge Funding Gap for Iraq

White House offers no estimates for next week's conference. Debt relief is another concern.

October 18, 2003|Sonni Efron | Times Staff Writer

WASHINGTON — This week's U.N. resolution, and new pledges of aid for Iraq totaling $2.7 billion from Japan, Britain and Spain raised the Bush administration's spirits as it heads into an international donors conference in Madrid, despite the vast gap between what has been pledged and the estimated cost of rebuilding.

Washington hopes that the U.N. resolution aimed at stabilizing Iraq by speeding the transfer of political power to Iraqis, and the international legitimacy it confers on the U.S.-led occupation, will spark a wave of donations. Some countries had been reluctant to give without such a resolution, both because they did not want to be seen as legitimizing the occupation and they did not want the money to be administered by the U.S.-run Coalition Provisional Authority.

Still, the Bush administration faces an uphill battle to marshal an estimated $55 billion for rebuilding and thousands of troops to allow it to draw down U.S. forces now in Iraq.

Even if the United States secures substantial pledges next week, the administration faces the daunting task of persuading Iraq's international creditors to forgive an estimated $300 billion to $400 billion in debt racked up by Saddam Hussein's regime.

For The Record
Los Angeles Times Wednesday October 22, 2003 Home Edition Main News Part A Page 2 National Desk 2 inches; 89 words Type of Material: Correction
Iraqi reconstruction -- A story in Section A on Saturday about international pledges for Iraqi reconstruction reported that Bathsheba Crocker of the Center for Strategic and International Studies said she would be surprised if participants in a Madrid conference this week were to pledge more than a combined $1 billion. The story should have clarified that Crocker said she would be surprised if the Bush administration were to raise more than $1 billion in Madrid in addition to the $6.3 billion in international pledges that had already been announced.

Washington has yet to formulate a strategy for tackling the thorny long-term debt issue, a senior administration official said Friday. That debt includes an estimated $199 billion in unpaid war reparations the United Nations ordered Iraq to pay Kuwait and Saudi Arabia after the 1991 Persian Gulf War -- a touchy political issue.

The administration's immediate focus is on raising funds that can be delivered quickly to speed a reconstruction effort whose pace and cost have become political liabilities for President Bush.

"You can only pile on so much," the official said. "Right now the pile on is for Madrid, and it's for money. The pile on a little bit down the road is going to be for debt relief."

About 75 nations are sending delegations to the Madrid conference that will begin Thursday, and the administration has been scrupulously careful not to estimate how much money it expects to be raised there.

But clearly, the pledges made this week -- $300 million from host Spain, $900 million from Britain and $1.5 billion from Japan, with hints that more might be coming -- exceeded the administration's expectations.

Just last month, when Secretary of State Colin L. Powell was grilled by senators in a private briefing devoted to, among other things, how much of the Iraq bill America would have to pay, he refused to predict that other nations would contribute more than $600 million.

On Friday, Powell sounded upbeat when talking to reporters aboard his plane heading toward Bangkok, Thailand, for a meeting of the Asia-Pacific Economic Cooperation forum.

"I'm more encouraged and optimistic than I was a week or so ago, and I think the [U.N.] resolution will help quite a bit, especially with the international financial institutions, the World Bank" and the International Monetary Fund, Powell said.

Still, officials do not expect to emerge from the conference having erased the gap between the $55 billion that the U.S. and the World Bank have estimated will be needed over the next five years to rebuild Iraq and the amount pledged so far. Before the U.N. resolution passed, the European Union had pledged $230 million for 2004, and the World Bank promised $2.4 billion to $5 billion over the next five years. The administration is seeking congressional approval for $20 billion.

Bathsheba Crocker, who has been studying Iraqi finances at the Center for Strategic and International Studies in Washington, said she would be surprised if participants were to pledge more than a combined $1 billion in Madrid.

In an effort to encourage contributions, Washington is not imposing conditions or making suggestions about how countries should donate, the senior administration official said.

"We're saying, 'Just give,' " the official said. "Our view at the present time is, man, any aid is good aid."

The World Bank is expected to set up a donor fund for Iraq at the Madrid meeting, so that donors who do not wish to hand their checks to the American-run occupation authority will receive assurances of financial accountability from the institution.

A critical question for the conference is how much the Persian Gulf states, notably Saudi Arabia, the United Arab Emirates, Kuwait and Qatar, will contribute.

So far, Riyadh, the Saudi capital, has been silent. The Saudi Embassy in Washington did not return telephone calls Friday requesting comment.

The UAE, Kuwait and Qatar have the deepest pockets in the gulf and typically give money as a group, but State Department officials said they had no idea how much to expect from the emirates.

France, Germany and Russia have announced that they did not intend to contribute financial aid or troops, because the Security Council resolution did not go far enough in putting the U.N., not the U.S., in charge of Iraq.

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