This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 AMMAN 004534
OPIC FOR WILLIAMS/KIWAN TREASURY FOR OASIA - DEMOPULOS USDOC FOR 4520/ITA/MAC/ONE/PTHANOS
E.O. 12958: N/A TAGS: EFIN BEXP ETRD IZ JO SUBJECT: GOJ APPROACHES CITIGROUP RE TRADE FACILITATION MECHANISM
1. (sbu) During a July 22 courtesy call, Planning Minister Awadallah passed Charge a copy of a letter from the GOJ to Citibank Jordan GM Suhair al Ali proposing the establishment of a trade facilitation mechanism that would protect L/C's written for Jordan-Iraq commercial trade. Awadallah said discussions between the GOJ and Citigroup that began on the margins of the Dead Sea WEF were continuing in London at present, and the GOJ expected a positive response to their proposal in the near future. Awadallah noted that the GOJ had proposed using OPIC facilities as one possible mechanism for underwriting Iraq-related L/C's (Text of letter follows at end of this cable, reference to OPIC para 7 of letter.)
2. (sbu) Al Ali subsequently told Econoff that Citigroup is favorably inclined to develop such a mechanism, which they see as benefiting both Iraq and Jordan. She saw two possible options for such a mechanism. Under the first option, CPA or another competent authority could create an escrow account in a designated Iraqi bank (including the CBI, Rafidain, or the newly-created Trade Bank of Iraq) which Citibank Jordan could use to confirm outstanding L/C's for Jordan/Iraq trade. Citibank would also be willing to confirm L/C's routed through reputable Jordanian banks using the same escrow account. To do so, Citibank would need to get a feeling for how much exposure (in terms of open L/C's) they should expect at any given time for Jordan/Iraq trade. Under the second option, OPIC could provide guarantees through its facilities to allow Citibank to confirm open L/C's related to Jordan-Iraq trade, including those routed through Iraqi banks if appropriate.
3. (sbu) Al Ali said Citibank is currently meeting with Treasury officials regarding these proposals, and would follow up with OPIC in the near future. She said this proposal would be a win-win for the region, stimulating bilateral trade by boosting business confidence and continuing to develop the long-standing traditional ties between Iraq and Jordan. Such a program would have positive effects, she noted, in many Jordanian economic sectors - from banking to trade to manufacturing.
4. (sbu) Comment: We echo al Ali's comments as to the positive impact such a mechanism would create to stimulate trade between Jordan and Iraq. Many private sector contacts, including regional visitors to Jordan, have commented that the only thing keeping them from entering the Iraqi economy is a measure of financial protection to cover their trade activities. Instituting a program like that proposed by the GOJ could well stimulate trade and encourage private sector investors to pursue similar arrangements to encourage the flow of new investment into Iraq. The knock-on benefits of such an arrangement to Jordan's financial sector, transportation sector, and (to a lesser extent) manufacturing sector could also be significant in a relatively short time-frame. End comment.
5. (sbu) Begin text of GOJ letter to Citibank Jordan:
Reference is made to the meeting of His Majesty King Abdullah II with Mr. William Rhodes and the accompanying Citigroup delegation, during the meetings of the extraordinary summit of the World Economic Forum at the Dead Sea on 22 June, 2003, and to subsequent meetings that were held between the Minister of Planning, Dr. Bassem Awadallah, and members of the senior management of Citigroup.
During these meetings, discussion focused on exploring possible means to leverage and build on the long standing business and economic ties that Jordan maintained with Iraq, in order to position Jordan as a key gateway for the re-construction and long term development of Iraq.
Jordan's experience in economic relations with Iraq has been successful in all measures extending over most economic activities and withstanding numerous political and economic hurdles. Iraq has been and continues to be one of Jordan's most important trade partners. Furthermore, Iraq has been the biggest supplier of oil to Jordan, giving our economic relations a significant strategic dimension.
The Aqaba Port has been over the years the main port for supplying goods to Iraq. The infrastructure of the port, the availability of spare capacity and the high efficiency in moving goods equips the port to maintain its role as the main hub for moving goods into Iraq.
The reliability of our banking sector was one of the most important elements in considering Jordan as a hub for doing business with Iraq. This is evident by the re-export figures of foreign-originating goods which was around $210 million in
Jordan's future economic relations with Iraq are expected to grow even further. Since the end of war activities, Jordanian exports to Iraq have witnessed a steady growth, totaling around $85 million, a testament to the strength of our relations and the good positioning of Jordanian goods in the Iraqi market.
It is within this context that the Government of Jordan would like to seek the assistance of Citigroup in setting up a trade mechanism that would enable Citigroup in Jordan as well as a number of select fine Jordanian banks to confirm Letters of Credit opened by the Central Bank of Iraq and/or Rafidain Bank, or any other bank in Iraq nominated by the Coalition Provisional Authority (CPA) for the import of goods into Iraq. Such a mechanism may be protected against either cash collateral to be held in Jordan, and/or guarantees established by multilateral agencies. To facilitate this trade flow, it is important that we put this in place as soon as possible.