The extent of the financial crisis facing Iraq as a result of its 2 1/2-year war with Iran was underlined today by a public Iraqi request to pay France with oil for military supplies.
Tariq Aziz, Iraq's deputy prime minister, has spent the past five days in France attempting to renegotiate an outstanding debt of 13 billion francs ($1.76 billion). France is believed to be the world's second largest supplier of arms to Iraq after the Soviet Union.
Aziz, who also holds the post of foreign minister, told the Paris newspaper Le Monde that Iraq is proposing to pay off 90 percent of its debt to France in 1983 with shipments of crude oil. He said that similar swap arrangements already exist with British, West German and Japanese companies.
It was unclear how Iraq plans to deliver the oil to France, since Iraq's main ports and pipeline remain closed or destroyed because of the war. Iraqi oil exports have decreased by 80 percent to less than 650,000 barrels a day since the war began in September 1980, when Iraq attacked Iran.
In the past, Iraq has relied on Saudi Arabia and other gulf states to supply oil in its name to western customers. These conservative governments have reluctantly taken Iraq's side in the gulf war, hoping to prevent the spread of Ayatollah Ruhollah Khomeini's Shiite revolution. Their cost to keep Iraq afloat is believed to be at least $30 billion a year.
Next to the gulf states, France has probably the largest stake in Iraq. About 6,000 French nationals are employed on projects under construction in Iraq. The government has guaranteed investments of about $4.75 billion in Iraq and is politically committed to the Baghdad government, which France sees as a key to stability in the region.
France has supplied Iraq with a large range of modern weaponry, including super Mirage F1 jets, and is considering an Iraqi request for five Superetendard fighter planes equipped with Exocet missiles, which proved effective for the Argentine Air Force during the Falklands campaign against the British last year.
Aziz said that, unless some barter arrangement is made with France, Iraq would only be able to pay about 40 percent of its outstanding debt this year.
Asked about his meeting in Paris earlier this week with U.S. Secretary of State George P. Shultz, Aziz said that it was useful to establish "a better understanding" between the two nations, which broke off diplomatic relations in 1967 after the Six-Day Arab-Israeli War.
The Iraqi foreign minister said that Shultz had welcomed "positively" his suggestion that the U.N. Security Council should be asked to back calls for an end to the gulf war with sanctions for noncompliance.