Investment/Financing: The proposal predicts that on their own, lobbying and PR will not be sufficient to secure the amounts that the Kuwaiti government hopes to receive in reparations. For the consortium to "maximize the value of Kuwait's compensation," Kuwait will have to part with even more of the reparations payments it has received. In addition to the $1 billion for the environmental fund, the proposal calls for another $2 billion of Kuwaiti money to be invested in a Middle East Private Equity Fund. Of that $2 billion, "$1 billion would be invested, by way of special agreement, in The Carlyle Group equity funds" for a period of at least twelve to fifteen years. At the end of that period Kuwait will get the return on these investments, as well as whatever the consortium has been able to negotiate in reparations payments.

For the consortium, it is an excellent deal: Its members get to manage a $2 billion investment portfolio, collecting healthy management fees as well as a percentage of interest. They also will be paid a "retainer" and 5 percent of any debts the consortium gets repaid, and "a negotiated percentage of the value returned to Kuwait exceeding" the pre-arranged amount.

Other consortium members sharing in these benefits include Fidelity Investments; BNP Paribas, a European bank embroiled in the oil-for-food scandal; Gaffney, Cline & Associates, an energy company specializing in oil and gas privatization; Nexgen Financial Solutions, a financial engineering firm partly owned by the government of France; and Emerging Markets Partnership, an AIG affiliate headed by a former senior vice president of the World Bank, Moeen Qureshi.

In addition to the financial windfall, the arrangement would give this group of private companies tremendous power. Whoever holds Iraq's debt has the ability to influence policy in Iraq at a moment of extreme political uncertainty. Yet for the government of Kuwait the proposed deal is fraught with risk. It's true that the fate of its Iraqi reparations looks grim. The consortium estimated that if Kuwait tried to sell those debts on the market, its $27 billion would be worth only $1.5 billion. But the consortium is asking Kuwait to risk $3 billion of reparations money it has already received in the hope that it can be used to leverage some of the rest. However, as Jerome Levinson points out, "There are absolutely no guarantees of even that."

It is clear that the consortium is extremely eager to seal a deal with Kuwait. Consortium CEO Shahameen Sheikh writes of making five trips to Kuwait in four months; Albright met with Kuwait's foreign minister about the issue on April 2, 2004; and the Albright Group's Carol Browner is reported to have "personally delivered a copy" of the proposal to his hotel when he was in Washington. Yet Kuwait appears reluctant: It took four months to reply to the proposal and then it would only say, in a letter dated August 10, that the proposal "will be taken into deep consideration and is currently being studied by the appropriate authorities." According to Ahamed al-Fahad, "The issue is now in the hands of the under secretary of foreign affairs," who was unavailable for comment. But Salem Abdullah al Jaber al-Sabah, Kuwait's ambassador to the United States, said, "As far as my information is concerned, my government is not considering such proposals."

Even if the deal falls through, the fact that the Carlyle Group and the Albright Group have been engaged in these negotiations may already have damaged debt relief efforts, hurting both Iraqi and US interests. Levinson points out that the Bush Administration has made commitments that Iraq's oil revenues will be spent on reconstruction. Yet the failure to deal with the reparations issue means that "part of those resources instead are being diverted to Kuwait. Who pays for this? It's the people of Iraq who continue to make reparations payments, and it's US taxpayers, who are asked to foot the bill for reconstruction, because Iraq's money is going to debt payments."

Levinson says this is all the more remarkable because of who is involved. "Here you have two former Secretaries of State seemingly proposing to use their contacts and inside information to undercut the official US government policy." Washington University's Kathleen Clark says the proposal "lays bare how former high-level government employees use their access in order to reap financial benefits that appear to be enormous."

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