London, June 6 : The US is holding around 50 billion dollars of Iraq's money in the Federal Reserve Bank of New York with a view to pressurizing Baghdad to sign a secret deal prolonging American occupation.
US President George W Bush wants 50 military bases, control of Iraqi airspace and legal immunity for all American soldiers and contractors in order to keep Iraq under control for an indefinite period.
The Independent reported that a secret deal is being negotiated in Baghdad that would perpetuate the American military occupation of Iraq indefinitely, regardless of the outcome of the US presidential election in November.
US negotiators are using the existence of 20bn dollars in outstanding court judgments against Iraq in the US, to pressure their Iraqi counterparts into accepting the terms of the military deal, details of which were reported for the first time on Thursday.
Iraq's foreign reserves are currently protected by a presidential order giving them immunity from judicial attachment but the US side in the talks has suggested that if the UN mandate, under which the money is held, lapses and is not replaced by the new agreement, then Iraq's funds would lose this immunity.
The cost to Iraq of this happening would be the immediate loss of 20billion dollars. The US is able to threaten Iraq with the loss of 40 per cent of its foreign exchange reserves because Iraq's independence is still limited by the legacy of UN sanctions and restrictions imposed on Iraq since Saddam Hussein invaded Kuwait in the 1990s.
The threat by the American side underlines the personal commitment of President George Bush to pushing the new pact through by July31.
The Iraqi government wants to delay the actual signing of the agreement, but the office of Vice-President Dick Cheney has been trying to force it through. US Ambassador in Baghdad, Ryan Crocker, has spent weeks trying to secure the accord.
The terms of the impending deal, details of which have been leaked to The Independent, are likely to have an explosive political effect in Iraq.
Iraqi officials fear that the accord, under which US troops would occupy permanent bases, conduct military operations, arrest Iraqis and enjoy immunity from Iraqi law, will destabilise Iraq's position in the Middle East and lay the basis for unending conflict in their country.
The accord also threatens to provoke a political crisis in the US. President Bush wants to push it through by the end of next month so that he can declare a military victory and claim that his 2003 invasion has been vindicated.