The Gulf state of Qatar has pledged to write off nearly $4 billion in Iraqi debt following a visit by U.S. special envoy James Baker.
A Qatari foreign ministry official pledged to forgive most of the debts Iraq owes the nation, saying that reducing debt will allow the Iraqi people to build a free and prosperous country.
The announcement followed a meeting between Qatar's Crown Prince and former secretary of state James Baker, who is President Bush's special envoy to Iraq on matters of foreign debt.
Mr. Baker will visit other Gulf states later this week, including Saudi Arabia, Kuwait, and the United Arab Emirates.
In December, Saudi Arabia vowed not to negotiate any debt relief with Iraq until the country had its own government in place.
Qatar's decision may hold little sway over Saudi Arabia's position. Qatar is a tiny, oil-rich nation and a key U.S. ally. The country allowed the United States to base its command center there during the recent war on Iraq, a decision that was unpopular in neighboring Arab countries.
Iraq owes an estimated $120 billion in foreign debt. About $45 billion is owed to Gulf states and dates back to the Iran-Iraq war in the 1980s. Iraq has claimed the money was not loaned, but given in the form of grants.
Washington believes debt relief will help Iraq rebuild its economy.
Mr. Baker has already secured pledges from several European countries, including France and Germany, to relieve portions of the debt accrued under the regime of Saddam Hussein.
Meanwhile, Tuesday Kuwait hosted an international trade fair to encourage foreign investment in Iraq. More than 1,400 companies from 50 countries attended, mostly American and European businesses vying for reconstruction contracts in Iraq.