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US issues threat to Iraq's $50bn foreign
reserves in military deal
Courtesy:
Patrick Cockburn in the Independent
6 June 2008
"..The US is able to threaten
Iraq with the loss of 40 per cent of its foreign exchange
reserves because Iraq's independence is still limited by the
legacy of UN sanctions and restrictions imposed on Iraq since
Saddam Hussein invaded Kuwait in the 1990s. The fact that Iraq's
financial reserves, increasing rapidly because of the high price
of oil, continue to be held in the Federal Reserve Bank of New
York is another legacy of international sanctions against Saddam
Hussein. Under the UN mandate, oil revenues must be placed in
the Development Fund for Iraq which is in the bank.The funds are
under the control of the Iraqi government, though the US
Treasury has strong influence on the form in which the reserves
are held. Iraqi officials say that, last year, they wanted to
diversify their holdings out of the dollar, as it depreciated,
into other assets, such as the euro, more likely to hold their
value. This was vetoed by the US Treasury because American
officials feared it would show lack of confidence in the
dollar.Iraqi officials say the consequence of the American
action was to lose Iraq the equivalent of $5bn. Given intense
American pressure on a weak Iraqi government very dependent on
US support, it is still probable that the agreement will go
through with only cosmetic changes. .." [see also
The Invasion of Iraq: Oil & the Euro]
The US is holding hostage some $50bn (�25bn) of Iraq's money in
the Federal Reserve Bank of New York to pressure the Iraqi
government into signing an agreement seen by many Iraqis as
prolonging the US occupation indefinitely, according to information
leaked to The Independent.
US negotiators are using the existence of $20bn in outstanding court
judgments against Iraq in the US, to pressure their Iraqi
counterparts into accepting the terms of the military deal, details
of which were reported for the first time in this newspaper
yesterday.
Iraq's foreign reserves are currently protected by a presidential
order giving them immunity from judicial attachment but the US side
in the talks has suggested that if the UN mandate, under which the
money is held, lapses and is not replaced by the new agreement, then
Iraq's funds would lose this immunity. The cost to Iraq of this
happening would be the immediate loss of $20bn. The US is able to
threaten Iraq with the loss of 40 per cent of its foreign exchange
reserves because Iraq's independence is still limited by the legacy
of UN sanctions and restrictions imposed on Iraq since Saddam
Hussein invaded Kuwait in the 1990s. This means that Iraq is still
considered a threat to international security and stability under
Chapter Seven of the UN charter. The US negotiators say the price of
Iraq escaping Chapter Seven is to sign up to a new "strategic
alliance" with the United States.
The threat by the American side underlines the personal commitment
of President George Bush to pushing the new pact through by 31 July.
Although it is in reality a treaty between Iraq and the US, Mr Bush
is describing it as an alliance so he does not have to submit it for
approval to the US Senate.
Iraqi critics of the agreement say that it means Iraq will be a
client state in which the US will keep more than 50 military bases.
American forces will be able to carry out arrests of Iraqi citizens
and conduct military campaigns without consultation with the Iraqi
government. American soldiers and contractors will enjoy legal
immunity.
The US had previously denied it wanted permanent bases in Iraq, but
American negotiators argue that so long as there is an Iraqi
perimeter fence, even if it is manned by only one Iraqi soldier,
around a US installation, then Iraq and not the US is in charge.
The US has security agreements with many countries, but none are
occupied by 151,000 US soldiers as is Iraq. The US is not even
willing to tell the government in Baghdad what American forces are
entering or leaving Iraq, apparently because it fears the government
will inform the Iranians, said an Iraqi source.
The fact that Iraq's financial reserves, increasing rapidly because
of the high price of oil, continue to be held in the Federal Reserve
Bank of New York is another legacy of international sanctions
against Saddam Hussein. Under the UN mandate, oil revenues must be
placed in the Development Fund for Iraq which is in the bank.
The funds are under the control of the Iraqi government, though the
US Treasury has strong influence on the form in which the reserves
are held.
Iraqi officials say that, last year, they wanted to diversify their
holdings out of the dollar, as it depreciated, into other assets,
such as the euro, more likely to hold their value. This was vetoed
by the US Treasury because American officials feared it would show
lack of confidence in the dollar.
Iraqi officials say the consequence of the American action was to
lose Iraq the equivalent of $5bn. Given intense American pressure on
a weak Iraqi government very dependent on US support, it is still
probable that the agreement will go through with only cosmetic
changes. Grand Ayatollah Ali al-Sistani, the immensely influential
Shia cleric, could prevent the pact by issuing a fatwa against it
but has so far failed to do so.
The Grand Ayatollah met Abdul Aziz al-Hakim, the leader of the
Islamic Supreme Council of Iraq (ISCI), which is the main supporter
of the Iraqi government, earlier this week and did not condemn the
agreement or call for a referendum. He said, according to Mr Hakim,
that it must guarantee Iraqi national sovereignty, be transparent,
command a national consensus and be approved by the Iraqi
parliament. Critics of the deal fear that the government will sign
the agreement, and parliament approve it, in return for marginal
concessions. |
