On today’s CNN website, in the article on Putin’s comments about the “goal [of the war] not being achieved,” billions of dollars of Iraqi debt is mentioned ($12B to Russia, $8B to France, $4B to Germany). That’s lots of money. Just how does all that work? One might have thought those countries would be in debt to Iraq because of the latter’s oil, but I guess Iraq has to borrow to get the expertise and technology to get the oil out of the ground, refined, and to market, so it gets converted into a saleable commodity. And then it services and pays back those debts with the revenues from the sale of that oil? The western developed countries then get the oil and interest on the loans to boot! Have I got this right?
And–is there a clearly written book that explains the world economy to the puzzled layperson that anyone knows of?
My WAG - that debt became uncollectable when the regime changed, as the new regime will feel that it has no obligation to pay it off. Any new money that the new regime needs to borrow is easily covered by the huge amount of oil reserves in the ground.
Iraq has the power to print Iraqi money, so default risk is not usually a problem with government debts. However, for the same reason, inflation risk can be huge, because printing new money would inflate the money supply.
Between the Oil for Food program and existing War Reparations (not debt) from the last go 'round, 90% of Iraq’s current oil production is already spoken for. I suspect that there is going to be a certain amount of trouble “easily” borrowing anything.
I am not stating that it cannot be done, only that it may be more difficult that it would appear to the casual observer.
There will also be problems if the new regime simply declares old debts invalid. The money was borrowed and the creditors need to be repaid. Those same creditors are likely to be among the people who will be prepared to offer new loans, provided they are not stiffed on the first set.
The Iraqi debts are a complicated issue that the major powers are just starting to fight over. A couple days ago Russia suggested that it might cancel its portion. Today they say not. Some sources say that the Paris club will decide the issue, but a bit of Googling reveals many different opinions.