Saudis withhold money for Iraq

SAUDI Arabia will withhold the $1 billion (£582 million) in loans and credits that it pledged last month for Iraq’s reconstruction until the security situation is stabilised and a sovereign government takes office, United States and Saudi officials said this week.

The Saudi decision is a setback for the Bush administration, which had hoped the kingdom would set an example for other Arab governments by providing vitally needed aid.

At a donors’ conference in Madrid last month, the Saudi government pledged to give Saudis willing to do business in Iraq $500 million in loans and $500 million in export credits over the next five years. The United States hailed the commitment.

The money "can’t go anywhere until there can be actual movement toward development’’, said a Saudi official, referring to the military and political instability in Iraq.

The Saudis’ reluctance underscores how the violence in Iraq is feeding deep ambivalence in Arab governments about the rebuilding effort, Arab diplomats in Washington said.

In a gesture of support, Arab governments have provided humanitarian assistance and begun rebuilding economic ties with Baghdad.

They also have taken the first steps toward recognising the US-picked Iraqi governing council.

But Arab governments have dragged their feet on securing their borders to prevent militants from entering Iraq. They have also been slow to respond to the Iraqi Governing Council’s pleas for a quick return of billions in Iraqi cash smuggled out by the former regime. And they have continued to hang back when Washington has asked for cash and military assistance.

US officials say the ambivalence of regional governments reflects in part their fears that shifting US plans for Iraq may produce a weak and divided state, the first Shiite-led Arab state, or the most democratic state in the Arab world.

While some governments have started to take steps, "too many have stood on the sidelines, criticising the US and remaining mute on the topic of the interim governing council", said one US official.

Another US official said that Arab regimes were resigned to the US being in Iraq for a while. "But there are suspicions ... there are misgivings," he added.

US officials continue to try to make the case to Arab regimes in Egypt, Syria and the Gulf that a stable, prosperous, democratic Iraq is in their interest.

But for many in the Arab world, any support for the US-led occupation of Iraq is remarkable.

A nation that is considered a wellspring of Arab civilisation is now patrolled by 130,000 US soldiers, in what to many ordinary Arabs "looks like another step in the American war against Islam", said one Arab diplomat.