Donors Promise $33B for Iraq Reconstruction

MADRID, Spain – International donors Friday pledged more than $33 billion for Iraq's reconstruction in the next four years — nearly two-thirds of it from the United States. The figure was short of the estimated $56 billion needed to rebuild the country.

Spanish Foreign Minister Ana Palacio (search) called the two-day conference "a great success," despite concerns in some quarters that much of the pledges are in the form of loans to a country already burdened with an estimated $120 billion in debt run up during Saddam Hussein's rule.

After the conference closed, Spanish Finance Minister Rodrigo Rato said it raised $33 billion in pledges, a figure that did not include export credits, technical assistance or other non-cash aid, ranging from tea from Sri Lanka to rice from Vietnam.

The total included $20 billion already promised by the United States. A senior U.S. official said earlier the United States had counted "in excess of $13 billion" in new pledges, which he called in line with expectations.

The World Bank (search) and U.S. officials estimated ahead of the conference of 77 nations that Iraq needs $56 billion in reconstruction aid in the next four years. The World Bank has said much of that amount will likely be covered by Iraq's oil revenues, private investment and other resources, rather than donations.

U.N. Development Program (search) spokesman Bill Orme said Iraq would receive the $9 billion in grants it needs for 2004, which he called a "critical year" because it's the only year when Iraq will be "totally dependent on external grant support."

"These have been two wonderful days in the life of Iraq and the world," Adel Abdul-Mahdi, a member of the Iraqi Governing Council (search), told the closing session. "Iraqis are shedding tears. Humanity has stood beside them."

At the start of the session, Secretary of State Colin Powell called the conference "a strategic investment in hope."

In an interview with European newspapers published Friday, Powell expressed regret that France and Germany weren't pledging new funds.

But he said it would "not mean it's a disaster" if the two-day conference doesn't raise the entire $36 billion — on top of the U.S. pledge — that the World Bank says Iraq needs over four years.

France and Germany, the two leading opponents of the U.S.-led war in Iraq, are holding back to register their disapproval of the U.S. blueprint for restoring Iraqi sovereignty.

Japanese Foreign Minister Yoriko Kawaguchi offered the second biggest pledge: $1.5 billion in grants for 2004 and $3.5 billion in loans for 2005-07.

Kuwait, which was invaded by Iraq in what led to the 1991 Gulf War, offered $500 million in new money, on top of $1 billion already spent.

"Now that the darkness that has prevailed over Iraq for decades has gone, we hope that peace and security with the help of the international community will prevail again," said Kuwait's foreign minister, Sheik Mohammed Sabah Al Salem Al Sabah.

Saudi Arabia pledged $1 billion, but the richest country in the Arab world said half would be in loans through 2007 and the rest would be in export credits. However, it gave the first hint that progress might be made on a U.S. push to relieve some of Iraq's debt.

Prince Saud Al-Faisal said Saudi Arabia is ready to reduce some of the $24 billion it was owed by Iraq, but he did not give specifics.

Mouwaffek al-Rubaie, a member of Iraq's U.S.-appointed Governing Council, called that "a step in the right direction."

The president of the council, Ayad Allawi, opened the pledging session with promises that his country would not forget those who helped it in its hour of dire need.

"Your success here will be a success for humanity and a help for peace and security in the world," he said.

Italy added $232 million over three years — in addition to the 3,000 troops it has stationed in Iraq.

In all, the European Union is giving $812 million next year, said Italian Foreign Minister Franco Frattini, whose country holds the EU presidency.

That's less than the $931 million the 15-nation bloc offered to Afghanistan last year, reflecting the absence of France and Germany.

However, Germany's deputy minister for economic cooperation, Erich Stather, said Berlin might offer export credits and would play a "constructive role ... in finding a solution of Iraq's debts."

French Trade Minister Francois Loos said his country is "willing to envisage and adapt its treatment of Iraq's debt compatible with the country's finance capacity."

The IMF estimated Iraq owes about $120 billion, mainly to European and Gulf countries, plus reparations from the 1991 Gulf War.

"This is not the end of the process," U.S. Treasury Secretary John Snow told the conference. "We have much work to carry forward from here."

China pledged $24.2 million. Poorer countries chipped in too, like Slovakia with $290,000. Bulgaria and Egypt offered technical assistance but no money.

Iran, which fought Iraq from 1980-88 in a war that claimed 1 million lives, said it would let Iraq export oil through Iranian ports and supply its neighbor with electricity and gas.

International Monetary Fund director Horst Koehler said the fund could lend Iraq from $2.5 billion to $4.25 billion over three years. It would be the IMF's first loan ever to the oil-rich nation. The World Bank has said it will lend Iraq $3 billion to $5 billion over the coming five years.

But Koehler stressed Iraq needs economic stability and reforms, as well as debt relief, to lure private investment and lower a staggering 60 percent unemployment rate.

"These results will not come overnight," he cautioned. "And we know that these reforms will only succeed if there is ownership by the Iraqi people" — a reference to Washington's continued control of the country.

The American administrator in Iraq, L. Paul Bremer (search), acknowledged lingering differences over the war and its aftermath.

"But by our presence today we signify that we agree on one major point and that is the Iraqi people need help to realize their future of hope," he said.

In other pledges announced, South Korea has agreed to $200 million and Canada $230 million, most already spent.

American officials stressed that the United States would administer all U.S. contributions — not the new fund set up here to be managed by the World Bank, the United Nations and Iraqis.