12 - Iraq Gulf War Reparations

Summary

Chapter 12 is the story of Iraqi reparations imposed after the Gulf War. The rise in Iraqi indebtedness was a consequence of global geopolitical trends in the 1980s, when political lending trumped solvency concerns. It allowed Iraq to obtain financing on terms more favourable than offered by the US government. Reparations were a consequence of the end of the Iran–Iraq War when Iraq invaded Kuwait. Reparations were imposed by a UN Resolution with a direct enforcement mechanism to take money from oil revenues. I use oral history sources to trace how Iraqi debt was restructured after the US invasion in 2003. The restructuring was permeated by politics to inflict harsh terms on creditors at the Paris Club, at a time when creditor-friendly restructurings were the norm. Despite its apparent success, however, in going for a politically expedient deal at the Paris Club, I argue the restructuring missed an opportunity to enshrine a doctrine of odious debt in international law. All debt was written off, except war reparations, which were paid in full through sanctions and war. They proved to be senior to all other debt and did not enter the sovereign debt restructuring.