UAE Cancels $7 Billion Iraqi Debt

By Rick Moran

In a sign that Arab countries may be starting to legitimize the Iraqi government, the United Arab Emirates has forgiven the entire $7 billion debt that Iraq owes the country:

UAE President Sheikh Khalifa bin Zayed Al Nahyan promised to "put out these debts," appoint an ambassador to Baghdad, and "help Iraq building the holy shrines that were targeted by the terrorists," al-Maliki said in a written statement.

Al-Maliki and the sheikh met Sunday, the first day of a two-day official visit. Al-Maliki was accompanied by the Iraqi ministers of Interior, Commerce and Industry.

"Our biggest challenge is now the reconstruction and rehabilitation of the economic situation and to provide services to our citizens," al-Maliki said.

Debt relief is a major issue for Iraq, and the United States has urged other nations to forgive Iraqi debt, most of which is held by Arab states, U.S. Deputy Treasury Secretary Robert Kimmitt said in late May.

The Iraqi debt burden is huge for the size of its economy. Western nations forgave about $12 billion of the $40 billion owed while restructuring the rest of the debt to reduce interest payments.

But Arab countries have held back - until now. They are owed approximately $80 billion - dating mostly from the Iran-Iraq War in the 1980's. The forgiveness of debt by the UAE is an important step in reviving the Iraqi economy.

Beyond that, the UAE has promised to normalize relations with Iraq - something the government desperately needs from Arab states in the area. Regional security will benefit if relations are re-established between Iraq and her Arab neighbors.