I guess the good news for the Iraqis is that after perhaps a 3-5 year period, once the country is back on its feet and successfully exporting as much oil as possible, Iraq will be receiving more than enough revenue to become a relatively prosperous nation by regional standards- as long as some Saddamlike thug dictator isn't stealing it all. That's the big challenge now, to endure that a responsible government emerges and reflects and serves the needs of the Iraqi people.

Taking US cue, Russia offers to forgive debt

By Stephen J. Glain, Globe Staff, 4/12/2003

WASHINGTON - Russia yesterday seized an opening provided by a senior US official, offering to forgive Baghdad billions of dollars in debt to assist in the reconstruction of Iraq.

Speaking at a summit meeting at St. Petersburg that included his French and German counterparts, President Vladimir V. Putin said Moscow would write off loans to Iraq valued at between $8 billion and $12 billion. He was responding to remarks made Thursday by the US undersecretary of defense, Paul Wolfowitz, who suggested France, Germany, and Russia could help postwar Iraq by writing off some or all of the loans they made to the country under President Saddam Hussein.

''On the whole, the proposal is understandable and legitimate,'' Putin said at a news conference. ''Russia has no objection to such a proposal.''

France and Germany said that the matter of Iraq's debt, estimated by some sources to be as high as $400 billion, would have to be settled among all of Iraq's creditors but that they would not rule out some level of debt forgiveness.

Wolfowitz's conciliatory remarks Thursday - he also stressed the importance of a strong, united Europe and said the United Nations could play an important role in Iraqi construction - echoed a drumbeat of commentary by senior US officials that suggested the Bush White House is courting postwar help from an international community it has done much to antagonize. With scenes of lawlessness in liberated Iraqi cities cluttering the airwaves and the magnitude of Iraqi reconstruction revealing itself, economists and diplomats say, the White House is signaling that the job may be too big even for the world's largest economy. And by agreeing to forgive some debt, Russia is signaling that it is willing to follow Washington's lead, especially if it leads to a share of the business of reconstruction.

In Washington, diplomats from ''Old Europe,'' as Defense Secretary Donald H. Rumsfeld had referred to Germany and France amid the diplomatic tussles that preceded the war, were slightly amused by Wolfowitz's proposal; it overlooked the fact that Iraq owes as much money to the United States as it does to many other countries. It betrayed a growing awareness in Washington that the war and its aftermath may be far more unwieldy and expensive than had been previously imagined. And it implied that managing exposure to Iraqi debt would require the kind of multilateral solution the Bush administration had seemed to regard with such distaste.

''There is a clear feeling,'' said one European diplomat, ''and wisely so, that the US is looking to incorporate allied partners to help reconstruct Iraq.''

Having spent the past month maneuvering Europe and Russia to the sidelines of lucrative peace-time reconstruction work, both Congress and the White House seemed to be reaching out to the international community. Yesterday, Congress voted down an amendment that would have effectively excluded companies from Germany, France, and other countries that opposed the war from competing for reconstruction contracts funded under an extraordinary appropriations bill. Although US companies are still expected to dominate Iraqi-repair work, Thursday's vote relieved foreign companies fearful that they were getting locked out of the process entirely after government agencies in March announced they were restricting the biggest contracts to several US firms.

Treasury Secretary John Snow, speaking Thursday ahead of this weekend's meeting of the G-7 leaders from the world's largest industrial market economies, said institutions like the World Bank and the International Monetary Fund ''should be prepared to offer their expertise and their technical assistance as soon as possible and we urge them to do so.''

Until now, World Bank and IMF officials were suggesting publicly and complaining privately that they have been all but neglected by Washington. Remarks made this week indicated the White House sees a need for outside help in rebuilding Iraq, even if it means losing control of the process. Many foreign governments have said they would help repair Iraq only under World Bank and IMF auspices working under the legitimacy of a UN resolution; in fact, the only way non-US companies could compete for contracts on an equal footing with US rivals is if the bidding is done through international agencies.

Last month Bush unveiled a supplemental budget request that set aside less than $2 billion for reconstruction costs, a provision even Republicans in Congress say could be 10 times below what will be necessary. On Thursday, World Bank and IMF leaders pledged billions of dollars for the rebuilding.

''One way or another, we'll have to get other countries involved,'' said Don Norman, an economist at Manufacturers Alliance/MAPI, a Virginia-based business and development research organization. ''People won't be investing money in Iraq unless there is a controlling authority there and that means some kind of international endorsement.''

''The US can't go it alone,'' an official at the World Bank said. ''Building infrastructure is one thing; to get them to work properly you need institutions, and that takes time and people who know how to build them.''