France Hints At Iraq Debt Relief

U.S. special envoy James Baker said his talks with French President Jacques Chirac have been "very fruitful," as he began a campaign to convince countries who opposed the war to help alleviate Iraq's massive foreign debt.

The former secretary of state said he and the French president discussed the importance of reducing Iraq's debt to give the Iraqi people a chance for freedom and prosperity. Baker says that he and Chirac are "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.

Baker's first stop in Paris on Tuesday was the U.S. Embassy, where he met Iraq's visiting finance minister and central bank governor, both members of the Iraqi Governing Council.

Baker was due in Germany later Tuesday for talks with Chancellor Gerhard Schroeder before traveling on to Italy, Britain and Russia this week. 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.

Baker's mission was complicated by a Pentagon decision last week to lock out France, Russia and Germany from bidding on $18.6 billion in U.S.-financed reconstruction projects in Iraq.

German Defense Minister Peter Struck expressed hope that Baker's visit to Berlin "will lead the U.S. administration to change its position on the awarding of contracts in Iraq," Struck's spokesman Norbert Bicher said.

Speaking on French radio Monday, the U.S. ambassador to France, Howard Leach, said Saddam's capture would "reinforce" French-American relations. Baker's visit would offer the chance to discuss "the next stages" in which "France perhaps will be able to participate in the reconstruction of Iraq," Leach told Europe-1 radio.

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.

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."

On Monday, Russia's diplomatic point man on Iraq, Deputy Foreign Minister Yuri Fedotov, reiterated Moscow's position that Iraq's foreign debt can only be restructured though the Paris Club.

The Club is an organization set up in 1956 to assist countries having a hard time paying their debts.