Iraq funds at risk

The expiration yesterday of UN protection of Iraq's oil revenue from creditors seeking damages stemming from Saddam Hussain's 1990 invasion of Kuwait may make the assets vulnerable to seizure, exacerbating tensions between the two countries. The Security Council voted in December to allow expiration of UN oversight and immunity for oil revenue deposited in the Development Fund for Iraq, created in 2003 to pay off debts incurred by the Hussain regime. Iraq, which holds the world's fifth-largest crude reserves, will continue to pay five per cent of its oil revenue to Kuwait as compensation for damages, including the theft of 10 Kuwaiti aircraft by Hussain. Foreign Minister Hoshyar Zebari said in December that Iraq would seek bilateral agreements to protect its assets abroad once the mandate expired. He didn't elaborate and the Iraqi government has made no announcements since then. Parliamentary monetary committee member Jawad Al Bolani said in an interview that a team of experts is trying to resolve the issue of Iraqi funds abroad and that ‘significant steps" have been made. A lawyer for Kuwait Airways, Christopher Gooding, said "the class of assets against which we can seek enforcement has expanded." "Despite pleas to the contrary, Iraq is an extremely rich country," Gooding, a partner at London-based Fasken Martineau, said on Wednesday. "Its trading assets are available worldwide, and it remains our intention to seize Iraqi assets whenever and wherever they are available." Iraq amassed about $130 billion (Dh477 billion) in debt under Hussain, of which it still owes about $21 billion to Kuwait. It also owes money to Qatar and Saudi Arabia, and continues to pay into the UN compensation fund even as its economy tries to recover from decades of conflict, sanctions and sabotage, eight years after the US-led invasion that ousted Hussain. "For anyone with unpaid debts with Iraq, this is a very significant development," Stephen Fietta, a solicitor at Volterra Fietta in London, said in an interview, referring to the expiration. Most legal jurisdictions recognise the ability of creditors to seize debtors' assets as a means of debt enforcement. A sophisticated creditor may be able to track Iraqi cargo and try to seize it as it enters a port, or upon its discharge, he said. "The risk might be minimized if the legal title was transferred by the Iraqi government before the oil was shipped," Fietta said. "So there are ways around this, but the constant risk of seizure and enforcement can become a real headache for sovereign debtors, just as for private ones." In July, Iraq will export 16.3 million barrels of Kirkuk crude oil from the Turkish port of Ceyhan on the Mediterranean, according to a shipping schedule obtained by Bloomberg News. The July programme comprises 24 cargoes with total volume of 524,355 barrels a day, the plan showed. The cargo sizes range from 250,000 barrels to 1 million barrels. Relations between Iraq and Kuwait have been strained since the end of the war in 1991. Outstanding issues include the demarcation of borders, missing persons and the location of Kuwaiti government archives. The 21-year row over the plundering of the Kuwaiti planes highlights the risks. Iraqi Airways offices in Amman were seized in May and assets of $1.5 million frozen following a lawsuit by Kuwait Airways. The Kuwaiti carrier is seeking $1.2 billion in compensation, and won a UK court order to freeze the Iraqi airline's global assets in April 2010. In a 2005 ruling in England, Iraqi Airways was ordered to pay more than $1 billion to Kuwait Airways. In October, the Canadian Supreme Court ruled that Iraq can't rely on state immunity to thwart efforts by Kuwaiti Airlines to seize assets in Canada, including planes made by Bombardier. "It is true that the international immunity will no longer be there; what will happen after June 30, we will have to see," said Muzhar Saleh, adviser to Iraq Central Bank Governor Sinan Al Shabibi. "Iraq has a large legal team, both at home and abroad, which will handle any future litigation." Saleh, like other Iraqi officials, called for all debts remaining from the Hussain-era to be written off. Otherwise, he said Iraq will continue to put aside money into a fund that will be supervised by Iraq's central bank. Stephen Tricks, a partner at Clyde & Co LLP in London, said most of the claims are likely to come from Kuwait Airlines, and that he doesn't expect to see "a large flood of claims" from companies and individuals sued for compensation. From / Gulf News