An odious debt was defined in 1927 by the Russian theorist of international obligations Alexander Sack as one incurred by a "regime," not "a nation." When Saddam Hussein went to France and Russia to borrow money, was that money turned to the use of the Iraqi people, or was it for self-aggrandizement?
The Democratic high command in Congress has joined forces with the White House in taking the position that the debts should be repaid. But that view of things hasn't been highly ventilated, and the political season is one that would certainly welcome a public debate on the question. Reps. Carolyn Maloney of New York and Jim Leach of Iowa have introduced legislation, the Iraqi Freedom Debt Act, which encourages the International Monetary Fund (IMF) and the World Bank to set aside the $150 billion debt incurred during Saddam's years in power.
At the end of October, Madrid will host a conference at which the question of contributions toward the recovery of Iraq will be discussed. One can of course expect that France and Russia will be there insisting that their loans to Iraq must not be segregated as odious debts, not repayable by the new Iraq. As things now stand, the U.S. government will simultaneously argue (1) that the debts should be repaid, and (2) that other nations should contribute to the cost of restoring Iraq.
That's the kind of thing that happens in diplomatic circle-squaring conferences, where you run into yourself coming down the other way. The United States believes formally that the debts should be repaid and believes also that the countries to which the money would be repaid ought to fork it over as their contribution to the rebuilding of Iraq.
If you participated in the Madrid conference, what arguments would you probably be hearing?
The odious-debt people are going to argue that the $150 billion (the figure is approximate) was used by Saddam in hideously expensive and egomaniacal ways. The money bought palaces, weapons of mass destruction and gold bullion for the ruling family. They will argue that Iraq's natural wealth was sufficient to provide for any normal needs of the state, such as to guard against starvation or pestilence.
The oil wealth of Iraq is enormous, and it is this, of course, that encourages the bankers to argue with realistic prospects of satisfaction. At some point in the future, Iraq will be producing perhaps as much as 3 billion barrels of oil per day. How and to whom should the proceeds from that oil flow?
Enter the United States. Our government has not asked to be compensated for the cost of our military venture to effect the liberation of Iraq. But voices are raised asking why we should not take some part of Iraq's oil revenues in the future to compensate us at least for some of the $87 billion Mr. Bush has asked for to consummate the Iraqi recovery.
Rep. Tom Feeney, R-Fla., has proposed that money paid out to Baghdad should be in the form of a loan, which would permit us, in better economic days, to put in for repayment. We do not know at this point whether, in Madrid, the U.S. representatives will press beyond the moral point. That point looks Russia and France in the face and says: You should contribute to this Marshall Plan for Iraq on the grounds that you stand to benefit from a non-odious neighbor in the Middle East. A different approach, though it makes the same point, is to adopt the position that money coming in from oil revenues should be pre-empted to repay the United States the anticipated $87 billion spent on assisting Iraq.
It is no wonder that Alexander Sack, who distilled the odious-debt doctrine seeking to protect successor governments from responsibility for debts incurred by predecessors when unrelated to national concerns, is a voice in the chanceries of power. It is a very solemn act to repudiate a national debt. Russia most recently did that, when in 1998 it failed to pay a debt come due. To have a responsible reason for not paying a debt generates great warmth of mind and body, and the prospect of booting Chirac and Putin for their failure to cooperate with us in removing Saddam gives understandable satisfaction.