James Baker in Rome for Iraq debt relief talks

ROME Dec 17 - US envoy James Baker arrived in Rome Wednesday on the next leg of a tour designed to persuade European creditors to extricate Iraq from its crushing US$120-billion (97 billion euros) debt quagmire.

Baker made no comment as he arrived at the Palazzo Chigi to meet Prime Minister Silvio Berlusconi.

In dealing with the Italians, Baker was talking to an administration that has consistently supported the US-led invasion of Iraq, unlike France and Germany, which he visited earlier this week.

Despite European anger over the US decision to deny Iraqi reconstruction contracts to countries that opposed the invasion, Baker obtained promises of support from both French President Jacques Chirac and German Chancellor Gerhard Schroeder.

After meeting with Baker Tuesday, French President Jacques Chirac and German Chancellor Gerhard Schroeder issued a joint statement with the United States calling for a substantial reduction of the Iraqi debt burden.

``I think that we all agreed that it is important to reduce this debt within the Paris Club if at all possible in the year 2004 and I think that we basically have agreement on the parameters of that stake,'' Baker said.

Chirac's spokeswoman, Catherine Colonna, added that France and the United States were ``in agreement on finding ways to reduce the Iraqi debt in 2004 in line with the appropriate Paris Club mechanisms.''

``We are also in agreement on the importance of working together for the reconstruction of Iraq,'' she said.

However Schroeder ``clearly expressed'' Berlin's opposition about being excluded from the reconstruction bidding process.

The Paris club is an informal association of 19 of the world's leading creditor nations. It was set up in Paris 47 years ago during an Argentine financial crisis, and meets behind closed doors once every six weeks or more frequently during a crisis at the French finance ministry.

Club members hold about one third of Iraq's debt, a total of US$41 billion. So far it has agreed on a moratorium on repayment of the debt until next year, while calling for restructuring as soon as possible.

Iraq's biggest creditor is Japan, which is owed US$4.1 billion. It is followed by Russia, owed US$3.5 billion, which Baker also plans to visit. France is owed US$3 billion, Germany, US$2.4 billion, the United States, US$2.2 billion and Italy, US$1.7 billion.

Baker is a former US secretary of state and a close friend of the family of President George W. Bush.

In TOKYO, James Baker is to visit Japan as early as next week as part of his mission to seek a reduction in Iraq's debts, Jiji Press said Wednesday, quoting government sources.

Baker will make a visit as a special envoy of US President George W. Bush to officially call on Tokyo to waive part of its official claim of US$4.1 billion, the news agency said.

Immediate confirmation of the report was not available.

The evening edition of the Nihon Keizai Shimbun said the Japanese government started considering to accept a debt waiver request after Germany, France and the United States agreed to offer substantial debt relief to Iraq.

``Chances are high that we will face difficulties in receiving repayment,'' Zenbei Mizoguchi, deputy vice-Minister for Financial Affairs, was quoted by the business daily as saying.

Japan is the biggest creditor nation to Iraq, according to Kyodo News. - AFP