Global Policy Forum

Why the US Wants Iraq's Debts Cancelled - and Argentina's Paid in Full

By Naomi Klein

Contrary to predictions, the doors of Old Europe weren't slammed in James Baker's face as he asked forgiveness for Iraq's foreign debt last week. Germany and France appear to have signed on, and Russia is softening. In the days leading up to Baker's drop-the-debt tour, there was virtual consensus that the former US secretary of state had been sabotaged by deputy defence secretary Paul Wolfowitz, whose move to shut out "non-coalition" partners from reconstruction contracts in Iraq of $18.6bn seemed designed to make Baker look a hypocrite.

Only now it turns out that Wolfowitz may not have been undermining Baker, but rather acting as his enforcer. He showed up with a big stick to point out "the threat of economic exclusion from Iraq's potential $500bn reconstruction" just as Baker was about to speak softly. The Iraqi people "should not be saddled with the debt of a brutal regime," said White House spokesman Scott McClellan. No argument here. But when I heard about Baker's "noble mission", as George Bush described it, I couldn't help thinking about an under-reported story earlier this month. On December 4, the Miami Herald published excerpts from a state department transcript of a meeting on October 7 1976 between Henry Kissinger, then secretary of state under Gerald Ford, and Admiral César Augusto Guzzetti, Argentina's then foreign minister under the military dictatorship.

It was the height of Argentina's dirty war to destroy the "Marxist threat" by systematically torturing and killing not only armed guerrillas, but also peaceful union organisers, student activists and their friends, families and sympathisers. By the end of the dictatorship, approximately 30,000 people had been "disappeared". At the time of the meeting, at the Waldorf Astoria in New York, much of Argentina's left had already been erased, and news of bodies washing up on the banks of the Rio de la Plata was drawing increasingly urgent calls for sanctions. Yet the transcript of the meeting reveals that the US government not only knew about the disappearances, it openly approved of them.

Guzzetti reports to Kissinger on "good results in the last four months. The terrorist organisations have been dismantled". Kissinger states: "Our basic attitude is that we would like you to succeed... What is not understood in the US is that you have a civil war. We read about human rights problems but not the context. The quicker you succeed, the better."

And here is where Mr Baker's present-day mission becomes relevant. Kissinger moves on to the topic of loans, encouraging Guzzetti to apply for as much foreign assistance as possible before Argentina's "human rights problem" ties US hands. "There are two loans in the bank," Kissinger says, referring to the Inter-American Development Bank. "We have no intention of voting against them ... We would like your economic programme to succeed and will do our best to help you." The World Bank estimates that roughly $10bn of the money borrowed by the generals went on military purchases, including the concentration camps from which thousands never emerged, and hardware for the Falklands war. It also went into numbered Swiss accounts, a sum impossible to track because the generals destroyed all records.

We do know this: under the dictatorship, Argentina's external debt ballooned from $7.7bn in 1975 to $46bn in 1982. Ever since, the country has been caught in an escalating crisis, borrowing billions to pay interest on that original, illegitimate debt, which today, at $141bn, is only slightly higher than that held by Iraq's creditors.

The Kissinger transcript proves that the US gave money and political encouragement to the generals' murderous campaign. And yet, despite its now irrefutable complicity in Argentina's tragedy, the US has opposed all attempts to cancel the country's debt. And Argentina is hardly exceptional. The US has used its power in the International Monetary Fund and World Bank to block campaigns to cancel debts accumulated by apartheid South Africa, Marcos in the Philippines, Duvalier's brutal regime in Haiti and the dictatorship that sent Brazil's debt spiralling from $5.7bn in 1964 to $104bn in 1985.

The US position has been that wiping out debts would be a dangerous precedent (and rob Washington of the leverage it needs to push for investor-friendly economic reforms). So why is Bush so concerned that "the future of the Iraqi people should not be mortgaged to the enormous burden of debt"? Because it is taking money from "reconstruction", which could go to Halliburton, Bechtel, Exxon and Boeing. It has become popular to claim that the White House has been hijacked by neo-conservative ideologues in love with free-market dogma. I'm not convinced. If there's one thing the Wolfowitz/Baker dust-ups make clear, it's that the ideology of the Bush White House isn't neo-conservatism, it's old-fashioned greed. There is only one rule that appears to matter: if it helps our friends get even richer, do it.

Seen through this lens, the seemingly erratic behaviour coming out of Washington starts to make a lot more sense. Sure, Wolfowitz's contract-hogging openly flouts free-market principles of competition. But it does have a direct benefit for the firms closest to the administration. Not only are they buying a debt-free Iraq, but they won't have to compete with their corporate rivals in France and Germany. The entire reconstruction project defies more neo-con tenets, sending this year's US deficit to a cartoonish $500bn, with plenty handed out in no-bid contracts, creating the kind of monopoly that allowed Halliburton to overcharge by an estimated $61m for importing gasoline into Iraq.

Those looking for ideology in the White House should consider this: for the men who rule our world, rules are for other people. The powerful feed ideology to the masses like fast food while they dine on that most rarefied delicacy: impunity.

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