UAE Annuls $7B Of Iraqi Debt

July 6, 2008 12:49 p.m. EST

Abu Dhabi, United Arab Emirates (AHN) - The president of the United Arab Emirates has decided to cancel the entire debt owed to it by Iraq, according to an official government source.

Iraq owes UAE a sum of almost $7 billion including interest and arrears, which was annulled by Sheikh Khalifa after meeting with Iraqi Prime Minister Nuri al-Maliki.

The cancellation of debt was announced as Iraqi Prime Minister Nouri Maliki was visiting the country.

The Gulf state also named a new ambassador to Iraq, Abdullah Ibrahim al-Shehhi, on Sunday to restore a full diplomatic mission in Baghdad.

Al-Shehhi has previously served as the United Arab Emirates' envoy to India.

Once Al-Shehhi's nomination is confirmed, UAE is likely to reopen its embassy in Baghdad by the end of the year after it withdrew its ambassador to Iraq following the 2003 U.S.-led invasion.

The post-Saddam Hussein Shiite government have been alerted by Sunni insurgent groups like al-Qaida in Iraq to avoid any relationship with UAE and to not allow the country to open its embassy in Baghdad.

In the past, Western nations, including United States, have urged nations to forgive billions of dollars in Iraqi debt.

Over the last three years, around $66.5 billion of Iraqi debt has been reduced, excluding the announcement made by the UAE on Sunday.

Major cancellation came from the Paris Club of 19 developed countries that annulled around $43.2 billion in debt to Iraq.