Iraq to pay $400 million for Saddam's mistreatment of Americans

“There were originally billions of dollars of claims from thousands and thousands of cases,” said one Iraqi official.

The claimants included an American boy who was seen frozen-looking on Iraqi television while Saddam Hussein asked him if he’d enjoyed his breakfast after he and his family were prevented from leaving the country.

Settlement money to come from frozen assets

After Saddam’s invasion of Kuwait, the regime rounded up several hundred American citizens in an effort to deter the attack launched by the United States several months later to drive Iraq out of Kuwait.

The money comes out of a roughly $900 million fund in frozen assets held by the US government to settle unresolved contracts under the Oil for Food program.

The program was an exemption to the sweeping trade sanctions in the 1990s, under which Iraq was allowed to sell oil to foreign buyers under supervision to buy food and medicine. It ended with the 2003 war, leaving dozens of countries and companies with unfulfilled contracts.

Senior Iraqi officials said the settlement was aimed at protecting Iraqi funds being held abroad. The Development Fund for Iraq, created by the UN, holds Iraq's current oil revenue as well as money from the former Oil for Food program and other frozen assets. The mandate of the advisory body which oversees it expires at the end of this year and Iraq needs US and international support to replace it with direct control of its revenue.

Iraq is still paying compensation to Kuwait under Chapter 7 sanctions – so far $27.6 billion – and continues to devote 5 percent of its oil revenues to a UN fund for Kuwaiti compensation. Baghdad, which argues that it needs the funds for reconstruction, is trying to cut that percentage in half.

Kuwait has taken additional measures such as seizing an Iraqi Airways plane on its first flight to London this year.

Iraq argues that it can’t be fully independent while it is still under Chapter 7.

Why the settlement is controversial

Despite Iraq’s potential oil wealth, the country has major economic problems, including widespread poverty, 30 percent unemployment, and an infant mortality rate among the highest in the region. Oil revenue, which the US believed would fund reconstruction when it invaded Iraq, has been limited by ongoing attacks and an infrastructure that will take billions of dollars in investment and years to repair.

The settlement is controversial not only because of Iraq's pressing developmental needs, but because it holds the current government accountable for Saddam Hussein’s actions.

“A lot of blood has flowed since then and a lot of it is Iraqi blood. It’s arguable that the suffering was not caused by the current Iraqi government or the Iraqi people,” says one senior Iraqi official. “This is politics, this is not justice.”

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