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Baker A Dealmaker On Iraq Debt

U.S. special envoy James A. Baker III won German and French agreement Tuesday to work for Iraqi debt relief, overcoming serious misgivings in Berlin about the U.S. exclusion of German firms from Iraqi reconstruction.

"Germany and the United States, like France, are ready not only for debt restructuring but also for substantial debt forgiveness toward Iraq," German Chancellor Gerhard Schroeder's spokesman Bela Anda said in a statement.

The German statement indicated that the United States also was prepared to relieve some Iraq debt. However, statements from the White House earlier were noncommittal.

"That process is just beginning. We are looking at restructuring and reducing the debt," White House spokesman Scott McClellan told reporters in Washington. "We will keep you posted as we move forward."

Despite responding to Washington's call for debt relief, Schroeder expressed misgivings about the Pentagon's exclusion of German companies from Iraqi reconstruction contracts. A Pentagon memo last week also locked out France and Russia from bidding on $18.6 billion in U.S.-financed reconstruction projects in Iraq.

"Germany's position on the awarding of reconstruction contracts in Iraq was clearly expressed in the talks," Anda said.

Earlier, Baker said his talks with French President Jacques Chirac were "very fruitful," and he and Chirac "agreed" that it's important to reduce Iraq's debt next year if possible.

Chirac made no comment after the talks, but his spokeswoman Catherine Colonna said the two had agreed on the importance of cutting Iraq's debt next year.

On Monday, French Foreign Minister Dominique de Villepin said France would join the other 18 members of the Paris Club to look for ways of restructuring or canceling Iraqi debt. The Club is an organization set up in 1956 to assist countries having a hard time paying their debts.

France, Germany and Russia were among the chief opponents to the Iraq war.

France, which has had a rocky relationship with Washington since it led the opposition to the war, indicated Saturday's capture of Saddam Hussein could open the way toward mending relations.

Iraq owes some $40 billion to the United States, France, Germany, Japan, Russia and others in the 19-nation Paris Club. Other countries and private creditors are owed at least an additional $80 billion.

With Iraq's oil industry — the engine of its economy — limping slowly back to full operation, U.S. officials worry that debt payments would strain the budget of any new Iraqi government. The Iraqis already face large costs for infrastructure, health care, security and schools once U.S. and international aid runs out.

After his stop in Berlin, Baker will travel on to Italy, Britain and Russia this week.

Russia, which is owed $8 billion by Iraq, made clear after learning of the ban on U.S. reconstruction contracts that it had no intention of writing off debt. The European Union has said it plans to investigate the legality of the ban, and U.N. Secretary-General Kofi Annan called it "not unifying."

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