American Losers in Gulf War

WHILE American soldiers won a decisive military victory over Iraq last March, US businesses lost big. Iraq's repudiation of its commercial obligations cost American firms millions of dollars, even as our troops returned home triumphant. US creditors of Iraq are caught in a new Bermuda Triangle, extending from recalcitrant Iraqis to United Nations bureaucrats, and presided over by officials of our own government.Immediately after Iraq's invasion of Kuwait, President Bush froze Iraqi assets in the United States under the International Economic Emergency Powers Act. Iraq retaliated by suspending debt payments to the US, and Baghdad's Revolutionary Command Council passed a law effectively prohibiting payment of the obligations owed by Iraq and its citizens to foreigners. US businesses lost heavily. An American bank that financed agricultural exports to Iraq was left with $50 million in unpaid loans. A Texas engineering company that rebuilt two oil terminals destroyed during the Iran-Iraq war is owed $18 million by Iraq's State Company for Oil Projects. A waste-management company lost trucks worth $6 million in Kuwait. A federal judge has found that the Iraqi Ministry of Industry and Minerals misled a New Jersey firm into specially manufacturing furnaces purportedly for m aking medical prostheses. The furnaces were not shipped when it was discovered they were intended for nuclear weapons development, but the manufacturer faces millions in losses. US taxpayers have also been hurt. The Department of Agriculture is expected to have to pay $1.9 billion because of Iraqi defaults on export credits the US guaranteed. Ordinarily, US creditors could look to the courts for relief. But our government has sought to block this route for obtaining compensation. The Treasury Department's Office of Foreign Assets Control issued regulations in January prohibiting Americans from filing lawsuits against Iraq without special licenses. Even where litigation is approved, the government has attempted to preclude entry of judgment and collection of damages. In two cases where American companies won large judgments, Treasury has even urged the courts to vacate their orders against Iraq. Washington controls $1 billion to $1.5 billion in frozen Iraqi assets. Our government refuses, however, to make these funds available to US claimants either through the courts or through a separate claims forum, such as the Justice Department's Foreign Claims Settlement Commission. Instead, American business people have been told that Iraq's assets must remain undistributed in order to ensure "fairness" among creditors and preserve our "diplomatic options." So far, fairness has meant that no one has been compensated. And given the failure of prior negotiations with Saddam Hussein, diplomacy seems unlikely to obtain the voluntary payment of millions of dollars in economic damages. THE government also holds out the promise of resolution of all claims worldwide through the United Nations. But the newly-created UN Compensation Commission has yet to be organized or funded. Perhaps it will not be funded now that the UN has voted to permit Iraq to pump limited amounts of oil, partly to pay war reparations. But the UN commission will operate through a multinational bureaucracy sure to function even more slowly than the Iran-US Claims Tribunal, whose deliberations are now entering their second decade. The commission, moreover, will probably handle only those claims arising from events after the invasion of Kuwait. Claims stemming from earlier transactions, including most of the commercial claims, are to be left to national governments. US claimants thus face a daunting array of obstacles. They are prevented from dealing directly with the Iraqis - either in court or out. They are told to wait for arrival of a new, inherently cumbersome UN agency - while the 50-year-old US Foreign Claims Settlement Commission, eager to begin registering claims, is largely ignored. Instead of using frozen Iraqi funds to satisfy US claims, our government blocks efforts at self-help and relegates the business casualties of the war to a low priority. Frozen Iraqi assets should be vested in the US so they can be applied to the claims of US nationals. Iraq should be allowed to participate in the claims process, but the forum for resolution of these claims should be in the US, subject to US law. One of the fruits of our battlefield victory should be fair and prompt compensation for US claimants. There is no excuse for further delay.