Identifier
Created
Classification
Origin
03AMMAN4650
2003-07-27 15:51:00
CONFIDENTIAL
Embassy Amman
Cable title:  

GOJ BEGINS OIL DISCUSSIONS WITH IRAQ

Tags:  EPET ENRG PREL IZ 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.
C O N F I D E N T I A L SECTION 01 OF 02 AMMAN 004650 

SIPDIS

E.O. 12958: DECL: 07/27/2013
TAGS: EPET ENRG PREL IZ JO
SUBJECT: GOJ BEGINS OIL DISCUSSIONS WITH IRAQ

REF: AMMAN 4535

Classified By: Ambassador Edward W. Gnehm, reasons 1.5 (b,d)

C O N F I D E N T I A L SECTION 01 OF 02 AMMAN 004650

SIPDIS

E.O. 12958: DECL: 07/27/2013
TAGS: EPET ENRG PREL IZ JO
SUBJECT: GOJ BEGINS OIL DISCUSSIONS WITH IRAQ

REF: AMMAN 4535

Classified By: Ambassador Edward W. Gnehm, reasons 1.5 (b,d)


1. (c) Summary: A working-level GOJ delegation from the
Ministries of Energy and Finance, along with refinery
officials, traveled to Baghdad July 24 to open discussions
with Iraqi counterparts concerning resumption of crude
exports from Iraq to Jordan. The two sides held exploratory
discussions on potential quantities, price and transportation
methods, but did not strike any deals. They also briefly
discussed opportunities for new pipelines to support a
rehabilitated Iraqi oil sector. While the GOJ delegation was
clearly disappointed by initial soundings from Iraq on the
continuation of preferential oil deals, they were practical
enough to see the need to begin planning for a new energy
reality. End summary.

TALE OF A FATEFUL TRIP


2. (c) A working-level delegation representing Jordan's
Energy Ministry (MEMR),Finance Ministry (MINFIN),and the
Jordan Petroleum Refinery Company (JPRC) traveled to Baghdad
July 24 to open discussions with Iraqi counterparts on the
resumption of crude oil imports. The delegation was led by
MEMR Secretary General Khaldoun Qteishat and JPRC General
Manager Azmi Khreisat. Econoff and Poloff accompanied the
six-member delegation, which flew a Royal Wings charter into
Baghdad International Airport (BIAP) and was met and escorted
throughout the day by CPA Oil Ministry advisors and mil
escorts. The trip represented the first direct post-war
contact between GOJ line ministries and Iraqi counterparts,
and engendered some jealousy from other ministries that did
not participate (notably Planning and Industry/Trade).

QUANTITIES


3. (c) The GOJ delegation held a private two-hour meeting
with Iraq's Oil Minister and the SOMO chief, after which MEMR
SecGen Qteishat back-briefed Econoff on the substance of the
talks. Qteishat cautioned that this discussion was only
probative, and that the real success was that contact had
been made and the two sides had agreed to continue
discussions, and to meet again in November/December.
Qteishat said the GOJ approached the GOI to begin supplying
crude in quantities of 50,000 bpd, to compensate for oil and

cash equivalents promised but not delivered by Kuwait and the
UAE. He said Iraqi Oil Minister Ghadban reported that all
Iraqi crude exports were already contracted to other
(unspecified) buyers, but that a small quantity such as that
requested by the GOJ could probably be accommodated.

PRICING


4. (c) Qteishat noted with some disappointment that Ghadban
was only prepared at the moment to offer exports at market
rates - a far cry from the $600 million-plus subsidy Jordan
enjoyed from Iraq under Saddam Hussein. Qteishat said,
though, that there should be some room for negotiation on the
pricing, and that he hoped to be able to secure more
concessionary rates from Iraq after further negotiation.

TRANSPORTATION OPTIONS


5. (c) The two sides also discussed transportation
mechanisms. Noting that the preferred method would be
overland shipments - both for cost-savings and to relieve
pressure on Aqaba port - the GOJ and GOI recognized that such
an arrangement would not be possible until the security
situation on the Amman-Baghdad highway improved
significantly. In addition, Ghadban said Iraq's fleet of
crude trucks was dilapidated, and was damaged somewhat in the
war. As a result, overhauls and new equipment purchase would
be necessary before overland shipments could restart in
significant quantity.

PIPE DREAMS AND OTHER THINGS


6. (c) Qteishat said the two sides also briefly discussed
reinvigorating plans for oil sector infrastructure programs
that were interrupted by the war or by UN sanctions. He
noted that MEMR was considering re-issuing an RFP for a
pipeline from the border to the Zarqa refinery, but said that
such a project would now most likely be considered as part of
a more ambitious scheme to make Jordan an alternate oil
exporting port for Iraq. The more ambitious scheme,
originally researched by the U.N. (according to Qteishat) in
the mid-1980's, envisioned running pipelines from Iraqi oil
fields to Zarqa and to Aqaba, and building an additional oil
refinery in Aqaba to process the crude. An even larger
version proposed continuing the Zarqa line to Haifa (note:
this is NOT/NOT the pipeline routinely mentioned in the press
- that line was built in the 1930's and has long since
disappeared. End note). Both sides admitted, though, that
any such scheme was years in the future.

7. (c) CPA advisors told Emboffs in a separate meeting that
gasoline deliveries to Iraq from Jordan continued and were
extremely well-received. They hoped Iraq to be
self-sufficient in gasoline production sometime in September,
at which time the need for such imports would cease. LPG,
though, continued to be a problem, with self-sufficiency not
likely until at least the end of the year. They said there
would be a continued need to use Aqaba as a through-put point
for LPG deliveries, but recognized limitations to Aqaba's
off-loading and storage capacity for such product.

COMMENT


8. (c) The Jordanian delegation was (pleasantly) surprised
by the hands-off attitude CPA took with respect to these
discussions. As one CPA advisor told Emboffs, they see
themselves essentially as facilitators to get the Ministries
back up and talking to their usual contacts. They professed
no wish to participate in any substantive talks, preferring
to let the Oil Ministry "cut its own deals." This meeting
made clear that, in some instances at least, Iraqis are
already back in charge of their own resources and their own
decision making on operational issues. The GOJ delegation
noted some disappointment that the relative "normalcy" of
such a bilateral meeting would go largely unnoticed by the
press. They were also disappointed, but not surprised, that
the concessional deals of the Saddam years had been laid to
rest. The GOJ is now planning for more challenging
negotiations with Iraq over oil futures. End comment.

BAGHDAD IMPRESSIONS


9. (c) Cell phones: Econoff's Fastlink cellphone received
incoming international calls in some locations, but not in
others. Outgoing calls were not possible. In addition, at
least some of the fixed-line phones at the Oil Ministry were
in active service. CPA reps noted that the Oil Ministry's
infrastructure was relatively undamaged by combat operations
and spared the degree of looting suffered by some other
Ministries.


10. (c) Coordination needs: Despite numerous conversations
between Embassy staff, Amman HACC team, and CPA staff, this
visit came as something of a surprise to CPA. CPA should be
commended for the excellent support provided, both logistical
and hospitality, which were positively noted by the GOJ
delegation as well. CPA clearly faces a resource crunch,
which we believe will only become more acute as the number of
visitors increases - as just one example, we witnessed
extremely high demand for very limited motorpool resources at
the Oil Ministry, which forced some CPA officials and mil
liaisons to change their schedules to accommodate us. We
greatly appreciate their flexibility.


11. (c) One CPA officer noted that the presence of a
full-time travel/visit liaison from State or another agency
would greatly assist them in planning and executing visits
from USG personnel, third country diplomats, and private
sector entities. He said there should be no problem finding
physical space for such a coordination office, which he saw
as being increasingly necessary as ministries come on line,
USG visits increase, and the private sector begins to lose
its timidity regarding trips to Iraq. Finally, another
senior CPA officer noted a severe shortage of charter flight
seats available to outgoing CPA travelers and to incoming USG
travelers, as reported reftel. He said CPA would welcome any
arrangement to increase the availability of chartered seats
for USG travelers.
HALE