Iraqi compensation offer fails to break deadlock in talks

15 September 2008
National airlines and politicians meet to resolve dispute over looted planes.

High-level talks are continuing after a $200m cash offer from Baghdad to settle a compensation claim over planes and equipment stolen during the 1990 Iraqi invasion of Kuwait failed to break the deadlock.

Representatives of Iraqi Airways (IAC) and Kuwait Airways (KAC), and their governments, are holding talks in Kuwait City to resolve the ongoing dispute between the two carriers. One source close to the talks describes the negotiations as “very tough”.

The $200m cash offer from Iraq remains on the table and could be supplemented by a revenue sharing agreement and code-share deal between the two carriers.

However, Kuwait has complained that IAC is failing to provide accurate figures on how much these supplementary elements to the cash deal might be worth, adding that the offer to date falls far short of the $1.2bn it is seeking.

Talks on 7 and 8 September were attended by Kuwait’s Prime Minister Sheikh Nasser al-Mohammed al-Ahmed al-Sabah, and Iraq’s Finance Minister Bayan Jabr.

However, KAC is also aggrieved that Jabr has returned to Baghdad, having reportedly signed a memorandum agreeing to resolve the dispute, but leaving Kifah Jabbar, director general of IAC, to sort out the details. “One of those details is how much is to be paid,” says one Kuwaiti source. “There has been no meaningful movement towards a settlement. Kuwait will listen to properly authorised and properly funded offers.”

Sources on the Iraqi side concede that the value of the present offer has not been properly calculated, and that Baghdad’s hand is therefore weak. However, they contend that Kuwait has not played a constructive role in the discussions.

The original cash offer was made some months ago. Baghdad expected it to be dismissed but to provide the basis for negotiation. Instead, Iraq says Kuwait has made no counter request (MEED 30:5:08). “Since Iraq made the offer there has been no response,” says a source close to the Iraqi delegation. “The minimum we expected was a rejection.

“The [Iraqi] government is trying to attach value to unspecific code-sharing and revenue-sharing elements of a possible settlement. But the ministry is still trying to get off the ground and is not good at putting that kind of package together. We have suggested to KAC that it make a counter offer, no matter how extreme, that we could work from.”

The latest round of talks in the acrimonious dispute was prompted by the ruling of a Canadian court in late August allowing KAC to seize 10 aircraft ordered by IAC from Bombardier earlier this year, part of a $5.5bn deal for 50 new aircraft to replenish Iraq’s ageing fleet.

Kuwait has issued an injunction to seize the planes to settle the $1.2bn debt, and has started proceedings to have a 1994 UK Commercial Court ruling in KAC’s favour enforced in Canada (MEED 29:2:08).

Along with the 10 Bombardiers, Kuwait is attempting to seize two buildings in Montreal belonging to the state of Iraq. The legal dispute is ongoing.

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