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US Senate Votes to Convert Iraq Reconstruction Money from Grant to Loan

The U.S. Congress is nearing a final vote on President Bush's $87 billion request for Iraq and Afghanistan. The U.S. Senate late Thursday night narrowly (51-47) voted to convert money for Iraq reconstruction from a grant to a loan in a key setback for the Bush administration.

A number of Senate Republicans broke with the administration and joined Democrats to support converting half the $20 billion in Iraq reconstruction money to a loan.

Senator Susan Collins, a Maine Republican and a cosponsor of the amendment, defended her position, citing the growing U.S. deficit and Iraq's large oil reserves.

"I do not believe that it is in any way unfair to ask the Iraqi people to invest in their own future by repaying the American taxpayer some of the funding used to construct their infrastructure, particularly when they clearly will have the ability some day to do so," she said.

Under the plan, President Bush could waive repayment of the loan if France, Germany, Russia, Saudi Arabia, and other creditors forgive at least 90 percent of Iraq's debt to them. The vote in support of the measure came despite an intense White House lobbying campaign to defeat the loan idea.

Majority Leader Bill Frist unsuccessfully argued that a loan would slow Iraq's recovery.

"I would argue that it has the very real potential of complicating, and even undermining our ability to do what we all want, and that is to successfully stabilize Iraq," he said.

Senator Frist also argued a loan would undermine efforts to encourage other nations to contribute financially to the reconstruction effort, and would feed suspicions that the United States wants to control Iraq's oil reserves.

Just hours earlier, the House defeated a similar measure.

Differences between House and Senate versions of the $87 billion package will have to be reconciled before a final bill is sent to President Bush for his signature.

Most of the money in the package is to go to Iraq. Some $67 billion is to support U.S. troops.

Opponents of the bill, mostly Democrats, expressed concern about its high cost, and criticized what they said is the administration's lack of a post-war plan in Iraq.

"The President's supplemental request is an $87 billion bailout for mistakes and miscalculations of this administration," said House Minority Leader Nancy Pelosi.

But House Majority Leader Tom Delay of Texas underscored the importance of the package to winning the war on terrorism.

"The war that we are fighting cannot be won without a safe and secure Iraq. It cannot be won without the reconstruction funding in this bill," he said.

House and Senate leaders hope to send President Bush the legislation before an international donor's conference on Iraq opens in Madrid next Thursday.