JORDAN: LEADING U.S. INVESTOR RUNS INTO MORE

UNCLAS AMMAN 006945

SIPDIS

SENSITIVE

USTR FOR NED SAUMS
TREASURY FOR ABIGAIL DEMOPULOUS

E.O. 12958: N/A
TAGS: EINV JO
SUBJECT: JORDAN: LEADING U.S. INVESTOR RUNS INTO MORE
PROBLEMS


Sensitive but Unclassified.


1. (SBU) Summary. The largest U.S. investor in Jordan, the
Albemarle Company of Richmond, Virginia, is "heartbroken" by
the GOJ's October 15 sale of 50% of its stake in the Arab
Potash Company -- Albemarle's joint venture partner in the
Jordan Bromine Company -- to the Potash Corporation of
Saskatchewan. Albemarle believes that the Canadian company's
interests are in conflict with those of Jordan Bromine, and
that its Jordanian partners did not address Albemarle's
concerns in moving forward with the partial privatization.
The company argues that this reflects poorly on Jordan's
investment climate and is developing a strategy to engage the
Jordanian government at senior levels. End Summary.


2. (SBU) Scott Sutton, the Tokyo-based Albemarle official
directly responsible for the company's $90 million investment
in the Jordan Bromine Company (JBC),called ECON/C October 27
to register his company's dismay at the Jordanian
government's sale of 50% of its interest in APC to the Potash
Corporation of Saskatchewan (PCS). (APC is Albemarle's 50%
percent partner in JBC. The GOJ sold half of its 52%
interest in APC to PCS, giving PCS a 26% stake in APC and,
derivatively, a 13% share in JBC. In addition to its
ownership interest, PCS will control APC management.) The
sale alarms Albemarle because it makes PCS, a major global
competitor, effectively its unwelcome partner in JBC.
Heightening Albemarle's concern about conflicting business
interests, PCS owns 9% of JBC's main competitor in the
bromine business, Dead Sea Bromine of Israel.


3. (SBU) Sutton called this an "unfriendly takeover" and a
change in the rules of the game that was "any investor's
nightmare." He said JBC would now need PCS's approval before
undertaking any expansion or new investment projects in
Jordan. For example of how PCS could stand in the way,
Sutton observed that PCS would have little or no financial
interest in agreeing to a JBC expansion plan that came at the
expense of Dead Sea Bromine.


4. (SBU) Albemarle's efforts to raise its concerns with the
Jordanian government before the transaction with PCS was
completed on October 15 fell on deaf ears. Sutton said
Deputy Prime Minister Halaiqah -- who had been Albemarle's
local champion -- was unresponsive and that Executive
Privatization Commission chief Adel Kodah did not return
phone calls. Albemarle is now formulating a strategy on how
to address its concerns with the GOJ. Since Albemarle thinks
it is important that the GOJ maintain an ownership interest
in JBC's success, a preferred solution would be for APC to
sell its interest in JBC to a GOJ entity like the Social
Security Commission.


5. (SBU) Sutton said Albemarle had viewed its investment in
JBC as a model of U.S. investment in Jordan. Unfortunately,
"what everybody fears when investing in a developing country"
had now come to pass. He noted how the Jordanian government
had touted Albemarle's investment as a success story for
foreign investors -- including at an October 16 conference in
Washington that was attended by senior Albemarle executives
-- and yet seemed indifferent to the investor's concerns.


6. (SBU) Comment: Many competing factors were at stake in
the GOJ decision to sell part of its APC stake to PCS, not
least the $173 million in privatization income the government
will earn and its desire to make progress on the
privatization process. The concerns of Albemarle, which has
had a convoluted relationship with the GOJ, do not seem to
have figured in the decision process. This is not the first
time Albemarle has had serious issues with the GOJ. Earlier
this year, Albemarle, APC and the GOJ had a long and
difficult re-negotiation of their joint venture agreement to
address Albemarle's need to retain more cash for investment.
The GOJ, rather than seeing Albemarle's success as one to be
cultivated as a model for foreign investment (the project, on
plan and on target, began exporting bromine earlier this
year),has tended to address Albemarle's concerns reluctantly
and only under high-level pressure from the company. More of
that pressure may now be in store, and Albemarle can be
expected to ask the U.S. government to help.
GNEHM