TFIZ01: JORDANIAN MARKETS REACT CALMLY TO START OF

UNCLAS AMMAN 001704

SIPDIS

E FOR U/S LARSON, SECOR
TREASURY FOR OASIA--MILLS/CHANG
USDOC 4520/ITA/MAC/ONE/COBERG

E.O. 12958: N/A
TAGS: EFIN ETTC ECON JO
SUBJECT: TFIZ01: JORDANIAN MARKETS REACT CALMLY TO START OF
HOSTILITIES

Sensitive but Unclassified.


1. (sbu) We have been in touch with the finance ministry,
central bank, and local bankers, and have reported in our
sitreps and other messages that Jordanian financial markets
have been calm, with no exceptional demand for dollars or
withdrawal of deposits. There has been no pressure on
foreign exchange reserves.


2. (sbu) The stock market index closed up 1.25% on Thursday
(closed on Friday, Saturday). The biggest gainers were
industrial companies that might participate in Iraq
reconstruction and more liberal trade with Iraq. Banks have
lots of cash dollars on hand to meet any extraordinary demand
for banknotes, and have had no problems with correspondent
banks outside the region.


3. (sbu) In addition, the central bank has ordered
commercial banks to freeze deposits of the Iraqi government
and known fronts and to monitor all other Iraqi accounts for
suspicious movements.


4. (sbu) The oil flow from Iraq has stopped, and there
appears to have been a smooth shift to use of stocks in Aqaba
and Zarqa. Along with the common understanding that the Gulf
countries will provide concessional oil, this has been
reassuring. (FM Muasher told the Ambassador March 21 that he
had been in touch with the Saudis, UAE, and Kuwaitis to nail
down the final logistical and financial details.) Markets
are also reassured by the high level ($3.5 billion) of
official foreign exchange reserves.


5. (sbu) QIZ exports have been able to continue as the
Israeli border remains open for shipments via Haifa and Aqaba
port remains open. Non-regional carriers have sharply
curtailed air service, but the airport remains open and Royal
Jordanian is trying to fly as many of its regular flights as
possible, including direct service to the United States.


6. (sbu) Swift action on the OFF readjustments to allow the
UN to certify delivery of OFF goods in Jordan rather than in
Iraq would also help minimize the impact of the conflict on
those banks involved in OFF trade.


7. (sbu) On Sunday, the Ambassador and Finance Minister
will the bilateral debt rescheduling agreement. This will
give the Ambassador an excellent platform to highlight US
assistance to Jordan and the investment the US has made in
the bilateral economic relationship. This should provide
another element of reassurance for economic actors, who
generally expect the US to provide extraordinary assistance
to help Jordan weather the initial impact of a conflict.
GNEHM