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PARIS -- Major economic powers agreed Sunday to write off more than $31 billion in debt for Iraq in a deal that boosted U.S. efforts to help put the Iraqi economy back on its feet.
Also Sunday, Iraqi electoral officials announced that they had set Jan. 30 as the date for the country's first democratic elections despite a sharp rise in violence in the past month and threats of a boycott by Sunni Arab leaders. Raids and ambushes erupted across Iraq's Sunni region again Sunday, with a particularly bloody day reported in Ramadi, a provincial capital west of Fallujah.
Under the agreement, the Paris Club of 19 creditor nations will write off 80 percent of the $38.9 billion that Iraq owes them, group chairman Jean-Pierre Jouyet said. Club members are the United States, Japan, Russia and Europe.
Iraq owes an additional $80 billion to various Arab governments. A clause in the agreement gives the Paris Club the option to suspend part of the debt reduction if it is not matched by Iraq's other major creditors -- led by Saudi Arabia and Kuwait.
The United States had been pressing for up to 95 percent of the Paris Club debt to be lifted. Iraq has said its foreign debt was hindering postwar reconstruction, already struggling amid the country's persistent insurgency.
Iraq's finance minister, Adel Abdul-Mahdi, hailed what he described as a "historic agreement."
"This money is needed for Iraq not only because Iraq is a ruined country but because Iraq is an important player internationally," he said after the deal was signed in Paris. "What will happen in Iraq will affect politically and economically the Middle East and the world."
U.S. Treasury Secretary John Snow praised the deal as a major step in the rebuilding of Iraq.
"This is a real milestone, and it shows the transatlantic alliance remains a strong force for good in the world," Snow said during a meeting of finance officials in Berlin.
President Bush, attending a regional summit in Chile, praised the deal as "a major international contribution to Iraq's continued political and economic reconstruction.
Jouyet said in Paris that the debt reduction plan would work in three phases, with 30 percent of the debt being written off immediately.
Another 30 percent will be canceled when Iraq agrees on a reform program with the International Monetary Fund (IMF), expected in 2005. The third and final portion, representing 20 percent of Iraq's debt to the Paris Club, will be canceled in 2008, once Iraq has completed its three-year IMF program, Jouyet said.
He said the group had "shown its flexibility" over Iraq's reconstruction needs and its limited ability to service its debt in the short term.
"Iraq will be able to concentrate its entire resources on its reconstruction," he said.
The deal was reached after Russia, the one country that still needed to sign off on the deal, gave its approval after talks overnight, officials said.
For France, which opposed the war in Iraq, the deal was a considerable concession. It had long argued that slashing Iraq's Paris Club debt by more than half would be unfair to other poorer nations that also are saddled with debts but do not have the potential wealth of oil-rich Iraq. Germany, another opponent of the war, raised similar questions.
The Paris Club's 19 permanent members are Austria, Australia, Belgium, Britain, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, Russia, Spain, Sweden, Switzerland and the United States.
Election date
Under Iraq's interim constitution, the election is required to take place before the end of January; so the chosen date of Jan. 30 was no surprise.
But in recent weeks, attacks have intensified in towns such as Mosul and Ramadi, as well as Baghdad, where intense battles raged over the weekend between insurgents and U.S. troops backed by Apache helicopters. Key Sunni figures have said that unless the election is delayed until a semblance of calm returns, they will sit out the vote.
"There is no possibility under these circumstances for people to do a proper filling of forms and registration," said Ayad Samarrai, a spokesman for the Iraqi Islamic Party, whose leader has called for a postponement of the vote.
Iraq's interim prime minister, Ayad Allawi, has insisted the rebellion will be crushed by U.S. troops and their Iraqi allies before voting takes place, and religious leaders of the majority Shiites such as Grand Ayatollah Ali al-Sistani have pushed hard for a vote to take place on time.
The election will choose a 275-member National Assembly. In turn, that body will select a new government to replace the current, appointed leadership and oversee the drafting of a constitution. If the constitution is ratified, another election will be held in December 2005 to seat a permanent government.
Campaigning for the election is scheduled to begin Dec. 15, and Farid Ayar, spokesman of the Electoral Commission, said voting would be pushed ahead even in areas still racked by violence -- including Fallujah, Mosul and other parts of the volatile Sunni Triangle. Ayar insisted that "no Iraqi province will be excluded because the law considers Iraq as one constituency, and therefore it is not legal to exclude any province."
New clashes
In Ramadi, 70 miles west of Baghdad, insurgents ambushed an Iraqi National Guard patrol Sunday, killing eight guardsmen and injuring 18 others, police said.
Elsewhere, U.S. forces conducted a raid to capture a "high-value target" associated with Jordanian terrorist Abu Musab al-Zarqawi in Haqlaniyah, 135 miles northwest of the capital, a U.S. spokesman said. Six people were detained, although the military did not say whether the target was among them.
South of Baghdad, a convoy of Iraqi National Guard and police came under attack by insurgents armed with small-arms fire, rocket-propelled grenades and roadside bombs in Latifiyah, the U.S. military said. There were several Iraqi casualties.
To the north, U.S. soldiers in Mosul on Sunday discovered two more bodies, including one of an Iraqi Army soldier, near a site where the bodies of nine Iraqi soldiers were found a day earlier, said Lt. Col. Paul Hastings with Task Force Olympia. The nine, all shot in the head execution-style, were identified as soldiers based at Al-Kisik, 30 miles west of Mosul. Four decapitated bodies, still unidentified, were found in Mosul on Thursday.
In Baghdad, four large explosions shook the area near the U.S.-guarded Green Zone after sundown Sunday. There was no word on damages or casualties. Earlier, Prime Minister Ayad Allawi's office announced that his cousin Ghazi Allawi, 75, has been released by kidnappers nearly two weeks after he was abducted along with his wife and pregnant daughter-in-law. The prime minister's office had no other details. The women were released earlier.
The Washington Post and New York Times contributed to this report.
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