JORDAN: TRANSFER OF IRAQI ASSETS TO DFI

C O N F I D E N T I A L AMMAN 007178

SIPDIS

TREASURY FOR GENERAL COUNSEL
TREASURY FOR DAS JZARATE
TREASURY/OASIA FOR MILLS/DEMOPOLUS
NSC FOR ADNAN KIFAYAT

E.O. 12958: DECL: 11/04/2008
TAGS: EFIN ETTC PTER JO IZ
SUBJECT: JORDAN: TRANSFER OF IRAQI ASSETS TO DFI

REF: AMMAN 7025 (NOTAL)

Classified By: Ambassador Edward W. Gnehm. Reasons 1.5 (b) and (d).


1. (C) In follow-up to his October 29 conversation with
King Abdullah (ref),the Ambassador raised the urgent need
for Jordan to transfer frozen Iraqi assets to the Development
Fund for Iraq (DFI) by telephone with Prime Minister Fayez on
November 2 and in November 3 meetings with Deputy Prime
Minister Muhammad Halaiqa and Planning Minister Awadallah.
With the GOJ clearly having received the U.S. message, these
three (including perhaps others) met themselves on November 3
to discuss how to respond to the message Awadallah also heard
forcefully reiterated by his interlocutors in Washington last
week. The Ambassador expressed the U.S. Government's
frustration that Jordan was not being more responsive on this
important issue.


2. (C) Following the internal meeting, DPM Halaiqa told the
Ambassador that a decision had been made to transfer some
funds to the DFI, although he did not indicate an amount. He
said frozen Iraqi funds were left over after the GOJ had paid
Jordanian banks on suppliers claims submitted to the
"technical committee" in accordance with the April 24 law.
Halaiqa said this was because some claimants had not been
able to document their claims because paperwork from the
Iraqi side was lacking.


3. (C) Halaiqa said that the technical committee would
expedite its work and that an amount would be transferred to
the DFI "soon." He hoped that the United States would
support Jordan in working with Iraqi authorities to
compensate Jordanian suppliers if additional claims
materialized or were legitimized by the committee. In
addition, he said that Jordan hoped for the United State's
support in not lumping the Central Bank's $1.5 billion in
claims on its Iraqi counterpart into a comprehensive
multilateral treatment of Iraq's debt. (Awadallah noted that
the claims did not result from export or development credits,
but were instead resulted from Iraqi failure to make payments
due in cash upon delivery of goods.)


4. (C) Comment: It is clear that the GOJ has heard the
U.S. message. Over the last week, the new government has
moved smartly to address our concerns on these issues.
Recognizing that it falls short of our requirement that all
frozen funds be transferred to Iraqi control, there is
progress in the Jordanian position: 1) it is the first we
have heard that claims under the April 24 law would be less
than the approximately $500 million in frozen Iraqi assets,
and 2) it implies Jordanian acceptance that frozen assets
will not be used to reduce the $1.5 billion central bank
claim. This should allow a transfer to the DFI to be made in
the near future, and we will continue working with the
Jordanians to ensure that this happens and in a substantial
amount. Post would welcome any further Washington guidance.
GNEHM