May 8, 2007: Iraq has been asking nations to cancel over $50 billion in debts, incurred during Saddam Husseins rule. The implication here is that, if the debts are not cancelled, Iraq will simply renounce the debts as being those of dictator Saddam Hussein and his henchmen, and not an obligation of a democratic Iraq. That would put Iraqs international financial status at risk for several years, as lawyers battled it out and banks retaliated. Most foreigners feel that Iraq should pay, if only because the country sits atop over a trillion dollars worth of oil, and that most of the money went to pay for a war with Iran, a war started when Saddam invaded in an attempt to steal Iran's oil fields.

Iraq owes nearly $60 billion, most used to pay for the 1980s war with Iran. After the initial 1980 invasion failed, Iran struck back. It was only because of generous gifts and loans from other Arab states, and generous credit terms, from Russia and China, for weapons purchases, that Saddam was able to survive.

The largest creditor is Saudi Arabia, which is owed $17 billion. Saudi officials are apparently willing to forgive 80 per cent of the debt. Saudi Arabia sees Iraq as its main defense against Iranian aggression, and wants to develop good relations with the new Iraqi government.

Kuwait is owed $15 billion. Because of the 1990 Iraq invasion (partly in an attempt to cancel that debt), the Kuwaitis refuse to cancel the debt. Kuwait's ruler could just forgive the debt, but the elected parliament has enough power, and popularity, to rally public opinion against the Emir. While the elected officials have a lot of power, the unelected emir still has more. Other Arab states in the Gulf see Kuwaits quasi-democracy as a mistake, as it seems to create more arguing and conflict, than anything else. In Kuwait, the elected officials dare not risk offending their constituents by showing any willingness to forgive the Iraq debt.

Russia is owed $13 billion, and is willing to forgive the debt, in return for guarantees that new business will be forthcoming. Russia has worked out similar deals with other Arab nations that bought lots of weapons from the Soviet Union, and then were unable, or unwilling, to pay. These days, Russia is much stricter when it comes to getting paid for weapons.

China is owed $8 billion, has said little, but is believed to want whatever deal Russia gets.

The rest is owed to a collection of Western and Moslem states, all of whom wanted Iraq to survive its war with Iran in the 1980s.

While many of the elected Iraqi leaders see Iran as a natural ally, they also have to deal with the fact that the Shia Arab majority (65 percent) is more Arab than Shia when it comes to politics. Iran is a needed ally to make sure the Iraqi Sunni Arabs are crushed. Ironically, most of the money is owed to Sunni Arab nations, who have long supported the Sunni Arab minority that ruled Iraq, until 2003, and have supplied most of the terrorists, mainly for attacks on Shia Arabs, since then.