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What will happen to Iraq's debt?

By CNN's Richard Quest

Iraq's foreign debt is estimated to be from between $60 billion to more than $130 billion.

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Should Iraq's debt be written off?

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LONDON, England (CNN) -- As the war in Iraq draws to a close, there are divisions among the West over who should lead the reconstruction, and which companies should be involved. But the big area of debate comes with the mention of debt.

Several countries are owed several billion dollars by Iraq, and the question is, will they get that money back?

When it comes to the repayment of their debts from Iraq, both Russia and Germany have hardened their positions.

The U.S. has suggested it would be helpful if those who were owed money ignored the repayments. But the creditors are not so sure.

At the latest G7 meeting in Washington, the German Finance Minister, Hans Eichel, made it clear Germany will insist on repayment.

"We do not only expect to get our money back, we will get our money back," he vowed. Russia was equally firm.

It is no great surprise that these countries want their money back -- there is a lot of it at stake.

Iraq's foreign debt is estimated to be from between $60 billion to more than $130 billion.

And, while Iraq's leading creditors are in the Gulf nations like Saudi Arabia, the United Arab Emirates, and Kuwait, Western creditors are owed a fair bit of money too.

Neil Partrick of the Economist Intelligence Unit (EIU), told CNN the two preeminent Western countries that are owed money are France and Russia.

"They say they are owed $8 billion apiece. It is hard to be absolutely certain but that seems a reasonable estimate. Germany is probably owed something in the region of $2 billion as well," he said.

The debts were run up during the development of Iraq's infrastructure 20 to 30 years ago.

The borrowed money was invested into the oil sector, the telecom industry, and it is thought there is some defense-related debt as well.

Russia and Germany are prepared to reschedule those debts -- using the committee called the Paris Club of rich creditor countries, established in 1953.

But the question is -- will they ever actually get their money back?

Brigitte Granville, of the Royal Institute of International Affairs, said: "It's really a question of the Paris Club negotiations.

"The debt is usually agreed to be repaid but there are large discounts. It's renegotiated, rescheduled. So those countries will probably receive something, but not a very large amount."

The biggest difference between Iraq's position and that of, say, Afghanistan or Bosnia, is that in Baghdad's case there is the prospect of money in the future -- a lot of it.

Once the oil industry starts producing at full steam, and the dollars start flowing, then debtors see no reason why they should be left out.

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