By Lin Noueihed
DUBAI (Reuters) – The United Arab Emirates has cancelled almost $7 billion of debt including interest and arrears payments owed by Baghdad, becoming the first Gulf Arab country to forgive all of Iraqâ€™s debt.
The United States has pressed Arab governments to support Iraqâ€™s recovery by joining Western nations in forgiving their share of Iraqi foreign debts that total up to $80 billion.
Washington also wants Arab capitals to establish high-level diplomatic representation in Iraq.
In a step toward easing Baghdadâ€™s diplomatic isolation, the UAE appointed its new ambassador to Iraq on Sunday during a visit by Iraqi Prime Minister Nuri al-Maliki.
The move came a month after the UAEâ€™s Sheikh Abdullah bin Zayed al-Nahayan became the first Gulf Arab foreign minister to visit Baghdad since the U.S.-led invasion in 2003.
The UAEâ€™s official news agency WAM said the principle debt owed by Iraq totaled $4 billion loaned at different times. A UAE diplomatic source told Reuters the total sum that would be forgiven was almost $7 billion including interest and arrears.
â€œThe UAE stateâ€™s decision to cancel the debts accumulated by Iraq is an expression of brotherhood and solidarity between the two countries and is to help the Iraqi government carry out its reconstruction and rehabilitation plans,â€ WAM quoted UAE President Sheikh Khalifah bin Zayed al-Nahayan as saying.
Maliki, who is also due to visit Bahrain, welcomed the move, which he said would help his government to â€œrestore security and stabilityâ€ by lifting a major financial burden.
Washington also welcomed the UAE decision to cancel Iraqi debt, appoint an ambassador and reopen an embassy in Baghdad, White House spokesman Gordon Johndroe said in Toyako, Japan, where President George W. Bush is attending the G8 summit.
â€œWe appreciate the Emiratisâ€™ recognition that a secure and prosperous Iraq is in the interests of everyone in the region,â€ Johndroe said.
Over the past three years, about $66.5 billion of Iraqâ€™s overall $120.2 billion foreign debt has been forgiven. The Paris Club cancelled $42.3 billion, including Russiaâ€™s $12 billion.
Non-Paris Club members have cancelled a total $8.2 billion. $16 billion has been cancelled by commercial creditors.
Last year, Saudi Arabia pledged to cancel 80 percent of more than $15 billion in Iraqi debt but has yet to follow through. Kuwait, also owed $15 billion, has yet to write off any debts.
In further signs of Iraqâ€™s easing diplomatic isolation, the country is expecting visits from Jordanâ€™s King Abdullah and Turkish Prime Minister Tayyip Erdogan. King Abdullah would be the first Arab head of state to visit Iraq since the invasion.
Sunni Arab governments who once funded Iraqâ€™s 1980-1988 war against Shiâ€™ite Iran have held back from establishing top-level ties with Baghdad since the U.S.-led war toppled Saddam Hussein, citing poor security and extensive Iranian influence.
No ambassador from any Arab country has been stationed permanently in Baghdad since Egyptâ€™s envoy was kidnapped and killed shortly after arriving in 2005.
The UAE withdrew its top envoy from Iraq in May 2006 after one of its diplomats was kidnapped and held for nearly two weeks by Islamist militants.
It has maintained only low level representation since, but the appointment of Abdullah Ibrahim al-Shehhi, currently the UAEâ€™s envoy to India, marks a significant change. Saudi Arabia and Bahrain have also promised to send ambassadors to Iraq but the UAE is the only Arab country to move ahead with the process.
Shehhiâ€™s appointment has been endorsed by the Iraqi government and now awaits a final signature from the UAE president, the source said. It was not clear when Shehhi would arrive in Baghdad.
(Additional reporting by Toby Zakaria in Toyako, Japan; Editing by Giles Elgood)