Yahoo! News – Defying Bush, Senate Votes to Make Iraq Pay Back Loan
I tend to agree with the administration that making a significant amount of our aid to Iraq in the form of loans is a bad thing. It makes it look like we have roughed them up, and are now shaking them down. Not the sort of thing that is going to help our efforts in Iraq or elsewhere.

It bothers me though that most of the coverage of the loan clause ignores an important condition, namely that the loans will become grants if 90% of foreign debt against Iraq is forgiven. Perhaps this is unlikely, but it is, in general, a good thing to try to make happen. Ignoring the fact that compliance would make Iraq’s debtors into joint benefactors in its reconstruction, forgiving the debt is the right thing to do. These countries, and their various private lenders, were lending money to Sadam’s regime. Sadam’s regime is gone now, why should the Iraqi people, whom it exploited, be expected to pay its debts? And even if they should, why should they be paying it back at rates that were no doubt negotiated under duress during the decade Iraq was under UN sanctions when lenders in countries like France (to mention only one) did deals under very lopsided conditions.

Their amendment approved shortly after Vice President Dick Cheney (news – web sites) failed to bring wavering senators in line through a round of phone calls would require half of the $20.3 billion in reconstruction aid to be a loan to Iraq, unless the administration persuaded other countries to forgive 90 percent of Iraq’s existing debt.

If the $150 to $200 billion in foreign debt is forgiven which appears highly unlikely the full $20 billion in aid would be given to Iraq…