[WCUSP] US holding hostage $50bn of Iraqi reserves in military deal

[yvonne simmons]

>From the Independent, UK
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.