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Japan to write off majority of Iraq debt

 Japan's prime minister pledged Monday to forgive “the vast majority” of its Iraqi debt if other Paris Club nations do the same. China later said it would consider the idea.
/ Source: The Associated Press

Providing a critical boost to the U.S. campaign to win debt relief for Iraq, major creditor Japan pledged Monday to forgive “the vast majority” of its Iraqi debt if other Paris Club nations do the same. China later said it would consider the idea.

Japan’s announcement, which came after talks in Tokyo between U.S. envoy James Baker and Prime Minister Junichiro Koizumi, reversed earlier Japanese hesitancy to participate in Iraqi debt relief. Japan is also providing $5 billion to Iraqi reconstruction.

Iraq owes Japan some $4.1 billion, but that number reaches an estimated $7.76 billion when late penalties and other fees are included, the government said earlier this month. The United States has been encouraging creditors to assist Iraq by relieving part of its crushing debt.

“Japan is committed to provide substantial debt reduction for Iraq in the Paris Club in 2004, and will work closely with other countries including the U.S. to achieve this objective,” said a statement by the Foreign Ministry summing up the Baker talks.

Debt tops $120 billion
The Paris Club, which also includes the United States, Germany and Russia, is owed more than $40 billion by Iraq while Arab countries are owed at least $80 billion.

“Japan would be prepared to eliminate the vast majority of its Iraqi debt if other Paris Club creditors are prepared to do so in the context of a Paris Club agreement,” the statement added, saying that precise figures would come out of subsequent negotiations.

The ministry did not say whether the “majority” referred to the principal amount owed to it by Iraq or the total debt. One Foreign Ministry official, speaking on condition of anonymity, pointed out that Tokyo has included penalty fees in debt forgiveness decisions in the past.

The United States praised the announcement. Japan has already pledged a $5 billion package for reconstruction and is dispatching 1,000 troops on a humanitarian mission to the area.

“We welcome and strongly endorse Japan’s statement today,” said White House spokesman Sean McCormack, who was traveling with Baker. “This very forthcoming position is further evidence of Prime Minister Koizumi’s and Japan’s global leadership on Iraqi reconstruction.”

China ‘will consider’ reduction
Baker later headed to Beijing, where Premier Wen Jiabao said China “will consider” reducing Iraq’s debts, the official Xinhua News Agency reported.

China, a staunch opponent of the U.S.-led invasion in Iraq, says Saddam Hussein’s government owed it about $1.1 billion in 1990 before the first Gulf War, but the amount of current debt was not clear.

Xinhua paraphrased the premier as saying Beijing “fully understands the difficulties of reconstruction in Iraq and the situation of the Iraqi people.”

Baker described his talks with Wen and Chinese President Hu Jintao as “very good” but didn’t give any details.

Baker had already won agreement with several countries in Europe, including war-opponents France, Germany and Russia, to cooperate in debt reduction, and Japanese officials have said in recent days that they would work “constructively” with other creditors.

Iraq also owes $125 billion in reparations from the 1991 Gulf War, according to the Washington-based Center for Strategic and International Studies.