[R-G] US Issues Threat to Iraq's $50bn Foreign Reserves in Military Deal

[Yoshie Furuhashi]

<http://www.independent.co.uk/news/world/middle-east/us-issues-threat-to-iraqs-50bn-foreign-reserves-in-military-deal-841407.html>
US issues threat to Iraq's $50bn foreign reserves in military deal

By Patrick Cockburn
Friday, 6 June 2008

The US is holding hostage some $50bn (£25bn) of Iraq's money in the
Federal Reserve Bank of New York to pressure the Iraqi government into
signing an agreement seen by many Iraqis as prolonging the US
occupation indefinitely, according to information leaked to The
Independent.

US negotiators are using the existence of $20bn in outstanding court
judgments against Iraq in the US, to pressure their Iraqi counterparts
into accepting the terms of the military deal, details of which were
reported for the first time in this newspaper yesterday.

Iraq's foreign reserves are currently protected by a presidential
order giving them immunity from judicial attachment but the US side in
the talks has suggested that if the UN mandate, under which the money
is held, lapses and is not replaced by the new agreement, then Iraq's
funds would lose this immunity. The cost to Iraq of this happening
would be the immediate loss of $20bn. The US is able to threaten Iraq
with the loss of 40 per cent of its foreign exchange reserves because
Iraq's independence is still limited by the legacy of UN sanctions and
restrictions imposed on Iraq since Saddam Hussein invaded Kuwait in
the 1990s. This means that Iraq is still considered a threat to
international security and stability under Chapter Seven of the UN
charter. The US negotiators say the price of Iraq escaping Chapter
Seven is to sign up to a new "strategic alliance" with the United
States.

The threat by the American side underlines the personal commitment of
President George Bush to pushing the new pact through by 31 July.
Although it is in reality a treaty between Iraq and the US, Mr Bush is
describing it as an alliance so he does not have to submit it for
approval to the US Senate.

Iraqi critics of the agreement say that it means Iraq will be a client
state in which the US will keep more than 50 military bases. American
forces will be able to carry out arrests of Iraqi citizens and conduct
military campaigns without consultation with the Iraqi government.
American soldiers and contractors will enjoy legal immunity.

The US had previously denied it wanted permanent bases in Iraq, but
American negotiators argue that so long as there is an Iraqi perimeter
fence, even if it is manned by only one Iraqi soldier, around a US
installation, then Iraq and not the US is in charge.

The US has security agreements with many countries, but none are
occupied by 151,000 US soldiers as is Iraq. The US is not even willing
to tell the government in Baghdad what American forces are entering or
leaving Iraq, apparently because it fears the government will inform
the Iranians, said an Iraqi source.

The fact that Iraq's financial reserves, increasing rapidly because of
the high price of oil, continue to be held in the Federal Reserve Bank
of New York is another legacy of international sanctions against
Saddam Hussein. Under the UN mandate, oil revenues must be placed in
the Development Fund for Iraq which is in the bank.

The funds are under the control of the Iraqi government, though the US
Treasury has strong influence on the form in which the reserves are
held.

Iraqi officials say that, last year, they wanted to diversify their
holdings out of the dollar, as it depreciated, into other assets, such
as the euro, more likely to hold their value. This was vetoed by the
US Treasury because American officials feared it would show lack of
confidence in the dollar.

Iraqi officials say the consequence of the American action was to lose
Iraq the equivalent of $5bn. Given intense American pressure on a weak
Iraqi government very dependent on US support, it is still probable
that the agreement will go through with only cosmetic changes. Grand
Ayatollah Ali al-Sistani, the immensely influential Shia cleric, could
prevent the pact by issuing a fatwa against it but has so far failed
to do so.

The Grand Ayatollah met Abdul Aziz al-Hakim, the leader of the Islamic
Supreme Council of Iraq (ISCI), which is the main supporter of the
Iraqi government, earlier this week and did not condemn the agreement
or call for a referendum. He said, according to Mr Hakim, that it must
guarantee Iraqi national sovereignty, be transparent, command a
national consensus and be approved by the Iraqi parliament. Critics of
the deal fear that the government will sign the agreement, and
parliament approve it, in return for marginal concessions.
Search Query: Independent.co.uk The Web Go

-- 
Yoshie
<http://montages.blogspot.com/>