Dec. 16 (Bloomberg) -- Former U.S. Secretary of State James A. Baker III said he has won agreements from France and Germany on the need to restructure Iraq's $125 billion in debt.

``We agreed that it is important to reduce that debt,'' Baker, who is acting as a special envoy for President George W. Bush, said after meeting with French President Jacques Chirac in Paris. ``We would like to do that in 2004 and within the mechanism of the Paris Club.''

The government of German Chancellor Gerhard Schroeder said it reached a similar accord after Baker arrived in Berlin.

``Germany and the United States are -- like France -- not only prepared to reschedule Iraqi debt but also to offer Iraq substantial debt relief,'' German government spokesman Bela Anda said in a statement e-mailed to news organizations.

Iraq owes about $125 billion, of which more than 10 percent is to companies, according to the top U.S. civilian administrator in Iraq, Paul Bremer. The total figure is equivalent to about six times Iraq's gross domestic product.

The Paris Club, which represents Western government creditors, said after a meeting in July that its members are owed about $21 billion. Of that, $4.1 billion is to Japan, $3 billion to France, $2.4 billion to Germany, $2.2 billion to the U.S. and $1.7 billion to Italy. Those figures exclude late interest, which the Paris club says is roughly equal to the principal outstanding.

Reconstruction Contracts

Last week, Russian Defense Minister Sergei Ivanov told reporters in Moscow that Russia didn't intend to write off any Iraqi debt because ``Iraq is not a poor country.'' He spoke after the U.S. said it would bar companies from countries that didn't back the war, such as Russia, France, Germany, Canada and Sweden, from bidding for $18.6 billion worth of contracts for the reconstruction of Iraq.

French Foreign Minister Dominique de Villepin yesterday said he expects an agreement on Iraq's debt to be reached next year and that France will forgive some Iraqi debt if ``appropriate conditions are met.''

He said that the issues of debt relief and reconstruction shouldn't be linked.

In Washington, White House spokesman Scott McClellan said the U.S. believes the Iraqi people shouldn't be burdened by debts incurred by the regime of Saddam Hussein, who was captured Saturday by U.S. forces. McClellan didn't answer questions about whether the U.S. would lead by example to forgive or restructure Iraq's debt, calling Baker's discussions with foreign leaders preliminary.

``This process is just getting underway,'' he said.

All the debts were contracted before Iraq's August 1990 invasion of Kuwait that set off 13 years of international sanctions.

Baker also is meeting with delegation of members of Iraq's Governing Council in Paris. The delegation, which includes Abdul Aziz al-Hakim, a leader of the Shiite Muslim community, and Kurdish leader and council President Jalal Talabani, yesterday met with de Villepin and Chirac.

Last Updated: December 16, 2003 13:03 EST