Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, March 1, 1991                   TAG: 9103010408
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A14   EDITION: METRO 
SOURCE: The New York Times
DATELINE:                                 LENGTH: Medium

IRAQ REPORTEDLY CAN'T PAY WAR REPARATIONS

The United Nations Security Council passed a resolution on Oct. 29 that made Iraq liable for all war damage and losses suffered by Kuwait and other countries. When President Bush specified Wednesday evening the allies' conditions for a permanent cease-fire, he included Baghdad's "acceptance in principle of Iraq's responsibility to pay compensation for the loss, damage and injury its aggression has caused."

Iraq said Wednesday night it would comply with all 12 Security Council resolutions.

But forcing Iraq to pay reparations will be difficult, given its lack of money, and will run counter to other American interests, said Richard W. Murphy, a former assistant secretary of state for Near Eastern and South Asian affairs.

Iraq's near-empty treasury has been both a cause of the war and an obstacle to its conclusion.

On Feb. 15, when Iraq first said it would consider negotiating a withdrawal from Kuwait, one of its conditions was the cancellation of its foreign debts and the debts of neighbors that had not assisted the allied war effort.

An eight-year war with Iran ended in 1988 with Iraq virtually bankrupt. "They were in a very tight condition financially, which is why we had the invasion" of Kuwait, Murphy said.

The scarcity of overseas Iraqi assets that could be seized has prompted speculation that the only way to raise money for reparations may be to garnish Iraqi oil revenues.

The lack of money also means that the Baghdad government's prewar creditors have different interests at stake from governments, companies and individuals that lost money as a result of the Iraqi invasion of Kuwait.

Iraq's debts and potential liabilities dwarf its overseas assets, which were frozen Aug. 6 by the United Nations, said Sharif Ghalib, director of the Africa and Middle East department of the Institute of International Finance, a Washington-based research group.

Estimates of the frozen assets range from $4 billion to $6 billion. By comparison, Kuwait has said it would seek up to $60 billion in reparations.

U.S. companies are preparing damage claims that could total several billion dollars, mostly as a result of lost equipment and buildings in Kuwait, said Javade Chaudhri, a partner in international corporate law at Jones, Day, Reavis & Pogue in Washington.

Other countries can also make claims, with the Kuwaitis saying they will seek the return of property looted by Iraqi military forces.

Iraq owes $35 billion to Western governments and banks, $11 billion to the Soviet Union and Eastern Europe, and as much as $40 billion to other Arab countries.

Murphy pointed out that garnishing Iraq's oil revenue would conflict with any threats to block its oil exports to force the opening of its nuclear, chemical and biological research sites to international inspection - a more important American goal.