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Senate Approves, House Rejects Iraq Loan Provision

The amendment would require half of the funds aimed at restoring economic and political stability to Iraq to be considered a loan unless the administration persuades other countries to forgive 90 percent of Iraq’s existing debts, which are estimated to be between $90 billion and $130 billion.

The Republican-led House of Representatives had rejected the loan provision by a vote of 226-200 and appeared prepared to approve President Bush’s request for some $87 billion to fund operations and reconstruction in Iraq and Afghanistan.

Both houses of Congress must now negotiate a final version of the spending package with the hope that Capitol Hill can send a bill to the president ahead of an international conference of donor nations on Iraq next week in Madrid.

The Senate vote was swayed by a bipartisan coalition of lawmakers who believe American taxpayers shouldn’t carry the entire financial burden of rebuilding elements of Iraq’s economic and political infrastructure.

“It was very difficult to stop this train because it made so much sense,” said Sen. Olympia Snowe (R-Maine), one of eight Republicans who voted for the loan amendment, which passed by a vote of 51-to-47.

The president and top members of his administration including Vice President Dick Cheney and Secretary of State Colin Powell had lobbied against the loan provision. The White House wants lawmakers to approve the reconstruction money in the form of grants, arguing that loans will only add to Iraq’s debt problems and will discourage other countries from forgiving their loans to Baghdad.

“Iraq is burdened by past debts,” Deputy State Department Spokesman Adam Ereli said Friday. “Now is not the time to add the burden of new debts.”

“I’ve never seen the secretary of state as engaged as he was on this issue,” said Sen. John McCain (R-Ariz.), who supported the administration stance.

Senator Tom Daschle (D- S.D.), the Democratic leader in the Senate, said the vote “sent a strong, bipartisan message” that the administration “must do more to ensure that America’s troops and taxpayers don’t have to go on shouldering this costly burden virtually alone.”

Senate Majority Leader Bill Frist (R- Tenn.) pledged to work toward getting the loan provision removed from the final bill when House and Senate negotiators meet to iron out the final version of the bill.

Sen. Frist also added, “back home, people were asking for loans. … It was very divided, very close, and that probably reflects feelings around the country.”

The Bush administration has been ramping up its diplomatic lobbying to garner more aid from other countries for Iraq — efforts that were buoyed by the unanimous U.N. Security Council backing Thursday of a U.S.-drafted resolution to provide more international military and economic aid for the war-torn country.

The United Nations and the World Bank estimate Iraq will need some $35 billion through 2007 for reconstruction, not including funds needed for rebuilding Iraq’s oil-pumping facilities as well as for military and security needs, Spanish First Deputy Prime Minister Rodrigo Rato said Friday, according to CNN.

Spain, host of next week’s donor conference, has pledged some $300 million to Iraq’s rebuilding over the next four years.

Japan has also pledged some $1.5 billion and Britain about $900 million. The World Bank has promised some $3.4 billion, the International Monetary Fund some $400 million and the European Union some $230 million.

President Bush, in Tokyo on a six-day tour of Asia, thanked Japanese Prime Minister Junichiro Koizumi on Friday for his country’s contribution to Iraq and said the United States would appreciate anything else Japan could do.

U.S. and Japanese officials have indicated that Japan’s current pledge of $1.5 billion in reconstruction aid next year could be followed by a total of up to $5 billion over the next four years, the Associated Press reports.

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