Iraq’s debt is simply unpayable. If they spent their entire future oil revenues on repaying the debt it would take them decades to do so, without seeing a penny of that money to develop the country itself.
Here’s an article from the Wall Street Journal:
Iraq IS bankrupt. If the debt is repudiated, then Iraq might have a harder time getting loans in the future…but really, how exactly did the lenders imagine they were going to be paid? Everyone who lent Iraq money (but note that some of the debt is for reparations from the first Gulf War) KNEW the level of debt Saddam was piling up. If the people who lent money to Saddam Hussein get stiffed, so much the better.
I think it would be a good thing if people were afraid to loan dictators money because a future democratic government might repudiate the debt. You loaned Saddam money so he could build up his military and palaces and jails? And now he’s gone? Too bad, so sad.
We can’t force Iraq to take a loan from the US government for the simple reason that there is no legitimate authority in Iraq to agree to such a thing, and won’t be for some time. We can’t ethically unilaterally impose a debt on Iraq, that would be absurd. Since right now we are in the position of trustees it would be a conflict of interest for us to “loan” them money and then administer the spending of the money.
Remember we didn’t invade Iraq entirely out of the kindness of our hearts, but to get rid of Saddam and to establish some sort of legitimate representative semi-pro-american government there. If we just loot Iraq’s oil wealth and turn them into a colony then we will have failed in our war aims. Just because we can doesn’t mean we should, even setting aside ethics. It simply wouldn’t serve our interests in the Middle East to loot Iraq.