Identifier
Created
Classification
Origin
02AMMAN5964
2002-10-15 11:51:00
SECRET
Embassy Amman
Cable title:  

JORDAN: U/S LARSON MEETINGS ON ECONOMIC PLANNING

Tags:  EFIN ECON PREL JO 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
S E C R E T SECTION 01 OF 02 AMMAN 005964 

SIPDIS

NSC FOR GARY EDSON
NEA FOR A/S BURNS
EB FOR A/S WAYNE
FOR U/S LARSON

E.O. 12958: DECL: 10/14/2007
TAGS: EFIN ECON PREL JO
SUBJECT: JORDAN: U/S LARSON MEETINGS ON ECONOMIC PLANNING


Classified By: DCM Gregory L. Berry. Reasons 1.5 (b) and
(d).

S E C R E T SECTION 01 OF 02 AMMAN 005964

SIPDIS

NSC FOR GARY EDSON
NEA FOR A/S BURNS
EB FOR A/S WAYNE
FOR U/S LARSON

E.O. 12958: DECL: 10/14/2007
TAGS: EFIN ECON PREL JO
SUBJECT: JORDAN: U/S LARSON MEETINGS ON ECONOMIC PLANNING


Classified By: DCM Gregory L. Berry. Reasons 1.5 (b) and
(d).


1. (C) Under Secretary Larson had meetings in Amman
October 13-14 with Prime Minister Abul Ragheb and key
members of the Jordanian ministerial "economic team,"
including Finance Minster Marto, Planning Minister
Awadallah, Trade Minister Bashir and Central Bank
Governor Umayya Toukan. He also met Foreign Minister
Muasher and had a two-hour session with business leaders.


2. (S) The meetings were an opportunity to develop a
deeper understanding of the points raised in the
Jordanian paper on the economic impact on Jordan of
potential coalition military operations in Iraq. In
preparation for Deputies-level discussions this week,
following are the main themes that emerged from Larson's
discussions. These should be read in conjunction with
the State Department-prepared paper on economic
assistance to Jordan that has been submitted for the
Deputies' deliberations.

-- Sense of urgency. All the ministers, but especially
the Prime Minister, stressed a strong desire to have
emergency U.S. assistance in hand well in advance of any
conflict, that is, ideally before year's end (given the
widespread assumption that operations would not begin
before that time). The PM described at length how he
needed this both to prepare for economic consequences and
to reinforce domestic political support for the policies
Jordan would follow in the event of a conflict. Larson
described the mismatch between this Jordanian timeline
and the U.S. budgetary process. Understanding, however,
that it would be easier to sustain domestic political
support if there were a publicly useful show of U.S.
support for Jordan, a clear indication that a plan was in
place would be helpful, economically and politically, to
bridge the gap.

-- Oil. The ministers, particularly Marto, recognized
that Jordan's current oil arrangement with Iraq was not
sustainable in any case. However, an abrupt transition
to market prices would be a major fiscal and economic
shock. The foreign minister reported a slight opening
regarding supply alternatives: The visiting Kuwaiti

minister of state for foreign affairs told the Jordanians
that he would propose a formula to his Saudi and UAE
counterparts for dividing up a package of 80,000 barrels
of crude per day for Jordan. This could create an
opportunity to work with the Gulf producers to develop a
temporary plan for price mitigation. Under Secretary
Larson will also raise Jordan's needs in meetings this
week in Saudi Arabia and the UAE. Nevertheless, the
Jordanians are extremely dubious that the Gulf states
will provide oil on a discounted basis and thus mitigate
the sharp economic shock inherent in having their import
bill increase by 5% of GDP.

-- Export Disruption. Members of the business
community as well as the ministers highlighted the
importance of avoiding or minimizing a disruption of
Jordanian exports, particularly the booming textile
exports to the U.S. under the QIZ initiative. Concerns
included reluctance of U.S. importers to place orders
during what is perceived to be a crisis period and the
risk of air and seaport closure, as well as war risk
insurance premiums that discourage port calls in Jordan
and Israel. Larson described the U.S. experience last
year in dealing with similar issues involving exports
from Pakistan. It could be useful to include such work
with insurance companies and leading importers in a plan
to address Jordan's needs.

-- Bank Exposure. Another specific concern was the
exposure of Jordan's banking system in the form of
letters of credit extended to finance Oil-for-Food
program exports to Iraq. The Central Bank Governor
estimated that Jordanian banks had $500-700 million in
such credits outstanding at any one time. Currently, the
banks are paid from the O-F-F account only after the UN
certifies delivery of goods in Baghdad. As the governor
suggested, the UN could explore alternative procedures to
allow UN officials to certify delivery at the Iraqi
border or in special warehouses in Amman if it became
impossible to do so in Baghdad. This could mitigate the
risk borne by the banks and facilitate the continued flow
of humanitarian goods to Iraq.

-- Bilateral Jordanian Exports to Iraq. Jordan
currently exports $200-$300 million in goods and services
to Iraq in partial payment for oil received under the
bilateral oil for goods barter arrangement. This is a
declining but nevertheless substantial share of Jordan's
exports, as well as of employment and the company base.
Since alternative markets probably do not exist for these
generally low-quality goods, it is not immediately clear
how to address what is essentially a political risk.
-- Domestic Trucking. Managing the reaction of the
politically important trucking industry that currently
moves the oil and goods trade with Iraq was clearly one
of the Prime Minister's main political preoccupations.
Further work could be done to sharpen our appreciation of
the demand for trucking services in the event of a
conflict, such as to move humanitarian or other goods
from Jordan to Iraq. Such planning could allay some of
this concern.


3. (C) Larson stressed in all his meetings that
Jordan's concerns were receiving serious, top-level
attention in Washington. He hoped that his trip could be
the beginning of a deeper exchange. Once the U.S. was
ready, Jordanian ministers expressed their readiness to
travel to Washington or Europe to discuss economic
planning in greater depth.


4. (C) Under Secretary Larson reviewed this message and
requested that it be distributed to participants in the
Deputies meetings.
GNEHM