Iraq reached a historic milestone on December 21, 2021. That day, the Central Bank of Iraq announced that it had made a $44 million payment to Kuwait, the final installment of $52.4 billion in war reparations that Iraq owed for Saddam Hussein’s 1990 invasion of the Arab monarchy. The United Nations Compensation Commission (UNCC), the international organization charged with disbursing the funds, confirmed on January 13 that “all claimants awarded compensation by the Commission have now received the full amount of their respective awards.”
Over three decades after the Gulf War led to the expulsion of Saddam’s forces from Kuwait, and 19 years after an American-led invasion ousted him, Iraq can start to turn the page on one of the darkest chapters in its history. In a coda of sorts, the UNCC’s January 13 statement noted that it would convene “a special session of the Governing Council” on February 9 “to mark the payment in full of all compensation awarded by the Commission and the conclusion of its mandate.”
The story of the UNCC and Iraq’s war reparations to Kuwait began on April 3, 1991
The story of the UNCC and Iraq’s war reparations to Kuwait began on April 3, 1991, when the UN Security Council adopted Resolution 687. The Security Council, finding that “Iraq […] is liable under international law for any direct loss, damage — including environmental damage and the depletion of natural resources — or injury to foreign Governments, nationals, and corporations as a result of its unlawful invasion and occupation of Kuwait,” decided “to create a fund to pay compensation for claims” and “to establish a commission that will administer the fund.”
The UNCC, headquartered in Geneva, soon undertook the momentous task of sifting through 2.7 million claims to $352.5 billion in damages stemming from the Iraqi occupation of Kuwait. By 2005, the international organization had narrowed that number to “approximately 1.5 million successful claimants” seeking $52.4 billion. The UNCC paid the claims by siphoning a percentage of Iraq’s revenue from the sale of petroleum and petroleum products overseas.
The creation of the UNCC and the completion of its mandate mark a major achievement for international law and the law of war. The UNCC’s own website concludes, “The resolution of such a significant number of claims with such a large, asserted value over such a short period is unprecedented in the history of international claims resolution.” At the same time, a series of well-known developments in Iraq over the past three decades, from the fall of Saddam to the rise of the Islamic State, raises challenging questions about the ultimate wisdom of war reparations.
After a Western coalition removed Saddam from power in 2003, it installed a new central government in Baghdad to rebuild Iraq and oversee the country’s transition to democracy. Nonetheless, the international community continued to hold Iraq’s post-Saddam leadership responsible for his most onerous debt, the war reparations mandated by Resolution 687.
The UN Security Council even reaffirmed this stance on May 22, 2003, with Resolution 1483. The resolution ordered Iraq to send 5 percent of “all export sales of petroleum, petroleum products, and natural gas” to the UNCC to cover war reparations. “This requirement shall be binding on a properly constituted, internationally recognized, representative government of Iraq and any successor thereto,” the Security Council added.
Iraq’s new leadership had little authority to object to these terms even as the country struggled.
Iraq’s new leadership, dependent over the following years on military aid from a foreign coalition that included members of the UN Security Council, had little authority to object to these terms even as the country struggled to rehabilitate itself. As early as October 2003, Iraq won pledges from the international community for $13 billion in grants and another $20 billion in loans to assist with reconstruction – $22 billion less than what the World Bank and the UN described as necessary at the time. By June 2006, however, officials in Baghdad had only received $3 billion of the promised grants. The United States, a member of the UN Security Council that had voted for Iraq to keep paying war reparations to Kuwait, then had to bankroll much of Iraq’s efforts to rebuild.
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Iraq faced another hefty bill after its Western-supported campaign against the Islamic State, which all but leveled several major Iraqi cities. In February 2018, the Iraqi Planning Ministry indicated that rebuilding the country would require as much as $88 billion — $23 billion to meet Iraq’s immediate needs and $65 billion for the country’s long-term recovery. A study by Iraqi officials and the World Bank concluded later that year that the conflict between Iraqi security forces and the Islamic State had resulted in $45.7 billion in damage to Iraq’s infrastructure alone.
Even as the international community’s humanitarian aid to Iraq fell short in subsequent years, the country’s payments to the UNCC continued to flow after a pause from October 2014 to April 2018. The UNCC, for its part, only permitted this respite “due to the extraordinarily difficult security circumstances in Iraq and the unusual budgetary challenges” tied to the war against the Islamic State. The international organization also adjusted its claim to the proceeds from the sale of Iraqi oil to 0.5 percent in 2018, 1.5 percent in 2019, and 3 percent in 2020.
Kuwait’s gross domestic product per capita stood at well over $24,800 in 2020, compared to $4,000 in Iraq.
The number of claimants to the war reparations notwithstanding, the most obvious victim of Saddam’s invasion and the chief beneficiary of the UNCC remains Kuwait. Whatever the merits of the UNCC in the 1990s, this dynamic paints an uncomfortable image in the 21st century: an aspirational, impoverished democracy sending billions of dollars to an autocratic, wealthy monarchy that aided Saudi Arabia’s intervention in Yemen. Kuwait’s gross domestic product per capita stood at well over $24,800 in 2020, compared to a little more than $4,000 in Iraq.
While the UNCC once served as a mechanism to punish Saddam’s destructive foreign policy and compensate its victims, the international organization evolved into a significant obstacle for Iraq’s post-Saddam central government. Money that went to the UNCC and Kuwait could have played a role in funding Iraq’s reconstruction or resolving its overlapping energy and financial crises. Kuwait, on the other hand, has distributed free cash to its citizens on several occasions even as the energy superpower has contended with its own budgetary challenges in recent years.
Proponents of the UNCC might argue that, by forcing Iraq’s post-2003 leadership to keep paying reparations for an earlier regime’s actions, the U.N. Security Council deterred future wars of aggression. However, this strategy has a mixed record. In perhaps history’s most notorious example, the reparations that the Weimar Republic had to pay for the German Empire’s initiation of World War I exacerbated Germany’s postwar financial crisis, laying the groundwork for the rise of the Nazi Party and the onset of World War II. The payments to the UNCC undermined Iraq’s stability in a similar fashion.
Sudan offers a more recent case study. In 2019, a coup d’état unseated Omar al-Bashir, a Sudanese strongman accused of war crimes, crimes against humanity, and a litany of other abuses during his three decades in power. The provisional government that followed al-Bashir — comprising a mix of civilian and military figures — took crucial steps to transition the country to democracy. However, Sudan’s new leaders found themselves hamstrung by a problem that paralleled Iraq’s in circumstances if not in scale: American families affected by the Bashir regime’s support for militant groups in the 1990s demanded compensation from Sudan’s cash-strapped transitional government, ending in a $335 million settlement.
Though the UNCC is nearing dissolution, the experience of Sudan shows that the complex moral and financial questions surrounding war reparations will likely recur. The story of Iraq and the UNCC, in turn, can still serve as a lesson on the challenges of advancing transitional justice and accounting for the past while trying to move on from it.
Now that Iraq has settled its debts from the invasion of Kuwait, Iraqi officials can rededicate funds once destined for the UNCC to rebuild their nation. Only economists, though, can guess at what Iraq’s post-Saddam central government might have achieved if that $52.4 billion had never left the country in the first place.
