Government, Wheat Growers Agree Measures to Assist Iraq Trade

Trade Minister Mark Vaile announced today that following consultation with the Australian grains industry, the Australian Government has decided to join other governments in forgiving the vast majority of Iraq's debt. Iraq's debt to Australia is for exports, predominantly wheat, shipped to Iraq in the late 1980s and early in 1990.

As part of the announced measures, the Australian Government has committed in-principle to contribute $20 million to help build an integrated grains processing facility in Iraq, subject to its feasibility being proved.

Iraq owes in excess of US$150 billion, among the highest levels of external debt ever owed by an economy of its size. Australia is owed around US$500 million.

Wheat growers received some US$381 million from the Government in 1991. The Grains Council and AWB described the payments at the time as "full and final."

The exact proportion of debt forgiveness to Iraq remains to be determined in international negotiations over coming months. After debt forgiveness, the Government will still be working actively through the Paris Club to seek recovery of as much of Australia's remaining debt as possible.

"Following extensive consultation, the Government and industry (Grains Council of Australia and its affiliates AgForce Grains, NSW Farmers, VFF Grains, SAFF Grains and WAFF, and AWB Ltd) considers the interests of wheat growers are best served by agreeing to debt forgiveness and concentrating on the future Iraqi wheat market," Mr Vaile said.

"I announced a feasibility study into the grains processing facility on my visit to Baghdad last December. The project would assist the developing of Iraq's grains processing industry through technology transfer."

"The rehabilitation of Iraq is critical to peace and stability in the region. Cancelling a large amount of Iraq's debt will free up resources for the country to rebuild and recover more quickly. Good progress is being made in rebuilding Iraq's economy, which was shattered by decades of tyrannical misrule under Saddam."

Even with its oil resources, there is no way that Iraq would be able to service the current debt. Other countries including the US, the UK, Japan, China, France, Germany, Russia and creditors in the Middle East have also recognised the need for debt forgiveness for Iraq.

Relieved of much of its debt, Iraq has the potential to be a stable partner for Australia in the Middle East, providing new opportunities for Australian exporters and investors. This includes in the market for wheat, which has long been Australia's largest export to Iraq. The Government will continue its efforts to facilitate wheat exports to Iraq.

Contact: Matthew Doman (ministerial) 02 6277 7420 - Nicole Guihot (departmental) 02 6261 1555