World Bank and IMF need a Security Council resolution to enter Iraq

The issue of whether a UN Security Council resolution is necessary if the Bretton Woods institutions are to be involved in the reconstruction of Iraq appears to have opened up divisions between the Development Committee (which comprises finance ministers on the boards of both the IMF and the World Bank) and the officials of these two institutions.

Roberto Bissio

DO we need a Security Council resolution to go into Iraq? This was the question debated mid-April in Washington. And no, this is not the debate that took place in March about sending troops, but the present-day debate on what is needed for the World Bank and the International Monetary Fund to start supporting Iraq’s reconstruction.

World Bank president James Wolfensohn said in a press conference on 13 April, at the end of the spring meeting of the sister Bretton Woods institutions, that the Bank is now poised and ready to do its bit in rebuilding Iraq and that ‘no UN approval is needed’.

Yet, the official communique of the Development Committee states that ‘we support a further UN Security Council resolution’ on Iraq in order to ‘restore security, relieve human suffering and promote economic growth and poverty reduction’ in the country. For these tasks, according to the Committee, ‘the engagement of the international community, including the Bretton Woods institutions, would be essential’.

The Committee was established in 1974 to promote the transfer of resources to developing countries and its members are the finance ministers of the countries with a seat on the boards of the Bank and the IMF.

ECOSOC discussions

Most of the participants in the Washington talks moved to New York to continue the discussion at the United Nations on 15 April. At the high-level meeting of the UN Economic and Social Council (ECOSOC) with the Bank, the Fund and the WTO, German cooperation minister Heidemarie Wieczorek-Zeul emphasised that ‘in order to establish a stable, democratic and peaceful order in Iraq, what is needed now is a resolution of the Security Council to give the UN a clear mandate for the reconstruction process’. South African Finance Minister Trevor Manuel, who chairs the Development Committee, added that this is precisely what the Committee had decided. No comments were made by high-level authorities of the Bank and the Fund present at the meeting, nor by the US delegation.

The US is the only country with veto power at the Bank and the Fund, but it cannot by itself take a decision. It is not clear on what authority Mr Wolfensohn can act on Iraq, even as Bank president, if a majority of his board deems it necessary to have a UN resolution first. Similarly, during a meeting with the press on 22 April, Tom Dawson, director of external relations of the IMF, announced that ‘we are continuing to work both internally within the Fund and with other institutions and with interested governments on possible assistance for Iraq’. And he added that ‘we have had an internal task force working for some time on this issue’. Yet he was evasive on whether prior UN approval would be necessary. ‘There is no checklist’ (of conditions to be met before sending a mission), was all he replied on this issue.

Behind these technicalities, what is at stake is the issue of whether the Bank and the IMF should be supportive of an administration established in Iraq by the occupying forces or wait for the existence of a legitimate counterpart of an Iraqi government recognised by the United Nations. Billions of dollars in contracts for the reconstruction of Iraq are at stake.

Foreign debt

The external debt of Iraq became another issue of hot discussions, when US Treasury Secretary John Snow suggested that global creditors should forgive Iraqi debts, estimated at between $100 billion and $300 billion.

NGO activists present in Washington for the World Bank and IMF spring meeting said they were elated that a US official had recognised that debts left from corrupt and repressive governments are intractable obstacles to re-developing a country like Iraq, and that officials should apply the same logic to other nations suffering under worse conditions than Iraq. But that alternative was clearly not on the agenda.

The US government has steadfastly opposed cancelling debts in the rest of the world, said Soren Ambrose from the 50 Years is Enough network, ‘even in cases as egregious as the apartheid government’s debts in South Africa and Mobutu’s debts in Zaire (known now as Congo)’.

But other activists said they would welcome the move as it might set a precedent for forgiving illegitimate debt accrued by dictators. ‘We would definitely criticise the US as hypocritical, but this would still be a good start,’ said Ann Kathrin Schneider with Germany’s World Economy, Ecology and Development in Berlin.

Almost simultaneously, US Deputy Defence Secretary Paul Wolfowitz told Congress that France, Germany and Russia, countries that opposed the US-led invasion of Iraq, could only assist in rebuilding the country if they forgave billons of dollars of debt owed to them. ‘I hope, for example, they’ll think about the very large debts that come from money that was lent to Saddam Hussein to buy weapons and to build palaces and to build instruments of repression,’ he told the Senate’s armed services committee.

That is the height of hypocrisy, Ambrose said. ‘Going in this nearly unilateral fashion and conquering a country half-way around the world, devastating its infrastructure even more than it already was, is in a sense saying that ‘we are now responsible for Iraq and countries  are expecting us to finance its development, so now we are going to make the same demand that others have been making of us’.’

Preferential treatment

In fact, many developed-country governments are showing concern about the way the US instrumentalises the Bank and the Fund for its own political purposes, with preferential treatment for countries that are political allies. Not that this is a new policy, but the split among old NATO allies has created a situation where the friends of the US are not necessarily those of the rest of the majority votes at the Bretton Woods institutions.

The pledge made by the ‘Monterrey Consensus’ (the final document of the UN Financing for Development conference held in Mexico a year ago) to increase the voice of developing countries at the Bretton Woods institutions is still far from materialising. This is mainly because there can be no increase in the voting power of some countries without diminishing that of others - precisely those that now have a majority. But there was much talk in Washington of at least one possible change: make the rules transparent about how the heads of these institutions are elected. With the term of James Wolfensohn soon coming to an end, many countries are now challenging the unwritten rule that this is a post reserved for an American (while, traditionally, the head of the IMF is a European). Clarifying election rules, a basic democratic principle, might result in the position not anymore being  a de facto appointment of the US Treasury.

In a similar vein, a strong defence of multilateralism was heard at all four roundtables during the high-level ECOSOC meeting, where finance ministers, senior executives of the Bank, the IMF and the WTO, business leaders and NGO representatives debated the ‘coherence’ (or lack of it) of the policies of their institutions to bring about development and reduce world poverty.

‘Everybody knew Security Council Resolution 1441 (on Iraqi disarmament) and everybody wanted to have it implemented,’ said Ms Wieczorek-Zeul. ‘I demand that UN Resolution 55/2 will be implemented with the same international vigour.’ The resolution she referred to is also known as the ‘Millennium Declaration’, by which over a hundred heads of state committed themselves in 2000 to halve poverty in the world by 2015. Yet the increase in development aid necessary to do that has not materialised, the debt problem of the poorest countries is still far from being solved and the WTO has failed to meet its time-bound commitment to solve the problem of access to cheap medicine by HIV-AIDS patients in poor countries or to address the issues of agricultural trade.  

Roberto Bissio is Third World Network’s Regional Coordinator for Latin America. Additional information for the above article was sourced from Inter Press Service (IPS).