Iraq owed foreign banks and governments as much as $79 billion, including $7 billion in uninsured loans from commercial banks, according to an analyst at the Institute for International Finance.
Following the sharp world response to the invasion of Kuwait, Iraq suspended payments on its debts, raising the prospect of substantial losses at Japanese and European banks that had been heavy lenders.
U.S. banks have only about $575 million in loans to Iraq, the analyst said, and all but $112 million of that amount is guaranteed by government agencies.
Iraq's financial pressures are widely believed to have been a factor in President Saddam Hussein's decision to invade oil-rich Kuwait last week, and a variety of sources said before last week his country had fallen behind on payments to European agencies that had guaranteed loans for exports to Iraq.
Sharif Ghalib, director of the African and Middle East department at the Institute for International Finance, said Iraq owed a total of $25 billion to Western banks and nations at the end of 1989.
The bulk of that amount was guaranteed by British, French, West German and American government agencies in order to promote Western exports to Iraq. Iraq had defaulted on payments to the British agency, the Export Credit Guarantee Department, and in early June rescheduled its debts to the French export guarantee agency.
A total of $7 billion was owed to commercial banks and was not guaranteed.
In addition, Ghalib said that Iraq owes about $10 billion to the Soviet Union and other East Bloc countries. He said that Iraq was not paying debt service on a regular basis for those loans.
In addition, Iraq owed Persian Gulf nations huge amounts for loans that were extended during its long war with Iran. Most of that amount is owed to Kuwait and Saudi Arabia; small amounts were borrowed from the United Arab Emirates and Qatar.
Ghalib said that between the outbreak of the war in 1980 and the middle of 1982, the Persian Gulf nations lent Iraq $10 billion to $12 billion. Between $4 billion and $6 billion of that came from Kuwait.
After that, Saudi Arabia and Kuwait sold $32 billion oil from their shared neutral zone on behalf of Iraq.
In addition, Kuwait and Saudi Arabia gave or lent Iraq another $5 billion to $10 billion.
Although Iraq complained that Kuwait and Saudi Arabia hadn't forgiven these loans, few people in either kingdom expected Iraq to ever repay those loans and Iraq isn't believed to have been paying any interest on those debts.