JORDAN ASSISTANCE TO IRAQ: ASSET FREEZES

C O N F I D E N T I A L AMMAN 004725

SIPDIS

E.O. 12958: DECL: 07/28/2013
TAGS: EAID EFIN PREL IZ JO
SUBJECT: JORDAN ASSISTANCE TO IRAQ: ASSET FREEZES

REF: A. STATE 214593

B. USUN NY 1718

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


1. (u) As noted SEPTEL, Jordan has been extremely
forthcoming with material assistance for aid and
reconstruction efforts in Iraq. SEPTEL outlines Jordanian
assistance in this regard, as requested ref (a). Ref (a)
also requested information regarding frozen Iraqi assets.
Unfortunately, the news on this front is not as positive.


2. (c) On the positive side, the GOJ has been forthcoming
in its cooperation with USG forensic accounting teams who
have been in Amman on several occasions to identify
actionable Iraqi assets held in Jordanian banks. Working
with these teams, the GOJ says it has identified and frozen
approximately $500 million in actionable assets. Once
identified, though, the disposition of these assets has
become unclear.


3. (c) CPA advisor George Wolfe had two meetings at the
Ministry of Finance with Minister Marto and Sec'y General
Hammour in mid-July, during which he requested that the GOJ
transfer actionable accounts to the Development Fund for Iraq
(DFI),in accordance with UN SC Resolution 1483. In response
to Marto's rejoinder that Iraq's debt of $1.3 billion to the
Central Bank of Jordan needed to be addressed, Wolfe replied
that it would be more appropriate to consider the debt when
the general topic of Iraqi sovereign debt is discussed on a
wider scale, not in the context of funds that should be part
of the DFI.


4. (c) Wolfe suggested "circular treatment" as one way to
protect the liquidity of the Jordanian banks while at the
same time fulfilling 1483 and the DFI mandate. The assets
would be transferred to DFI and the DFI would in turn
redeposit the funds in Jordanian banks. Echoing CBJ
Chairman Toukan's earlier comments, Marto cited the April
24th law that protects frozen assets and sets up a committee,
of which Marto is chairman, to consider all claims and decide
their validity, a process that has not yet been completed.


5. (c) Marto told Wolfe that the total amount of frozen
funds was JD 356 million ($498.4 million). From those funds,
Marto said that JD 30 million ($42 million) had already been
paid against some claims. He said there were another JD 170
million ($238) in claims yet to be addressed, leaving about
JD156 million ($218.4 million) free and clear. Marto
estimated that at least 90% of the claims had been submitted,
with the remainder facing a September deadline at which time
the Jordanians would know the total number and amount of
claims. In addition, Marto said there was an additional JD
55 million ($77 million) frozen in an oil trading account.
Responding to Marto's allusion to a Free Trade Area between
Iraq and Jordan and trade (and thus possible additional, but
undocumented, claims) that occurred before the first Gulf War
in 1991, Wolfe said that such claims would not be appropriate
and could not be honored.


6. (c) Wolfe later told econoff that he was pessimistic of
any assets transfer to DFI by the GOJ, unless we could work
something out along the lines of his circular treatment
proposal, as any movement of the assets outside of Jordan
while claims are pending would be politically very difficult
for the GOJ. Indeed, shortly after Wolfe's visit, Marto
announced in the local press that frozen Iraqi assets would
first be used to settle outstanding Jordanian commercial
claims, and the remainder would be transferred to the DFI.
(Note: During a courtesy call by the Ambassador on July 28,
recently-appointed Minister of Industry and Trade (and former
Ministry of Finance Secretary General) Mohammad Abu Hammour
reaffirmed the political difficulties the GOJ faced regarding
the Iraqi assets, but acknowledged that the GOJ "would have
to comply with the UN resolution." Whether Marto and the GOJ
come around to this view is yet to be determined. End Note.)
GNEHM