JORDAN READY TO ADDRESS FROZEN IRAQI ASSETS, BUT

S E C R E T SECTION 01 OF 02 AMMAN 007525

SIPDIS

TREASURY FOR OASIA/MILLS-HUGENT AND DAS ZARATE

E.O. 12958: DECL: 11/20/2013
TAGS: PREL ETTC EFIN IZ JO
SUBJECT: JORDAN READY TO ADDRESS FROZEN IRAQI ASSETS, BUT
SEEKS TO ADDRESS CENTRAL BANK CLAIMS ON IRAQ AS WELL

Classified By: Amb. Edward W. Gnehm for reasons 1.5 (b) (d)

--------------
SUMMARY
--------------


1. (S) In a meeting the day after separate Treasury-led
discussions on frozen Iraqi assets with a Finance
Ministry/Central Bank team ended inconclusively (septel),the
GOJ on November 19 formally requested that the U.S. dispatch
a team empowered to discuss both frozen Iraqi assets in
Jordan and the Iraqi trade ledger. Foreign Minister Muasher
praised the work of the Treasury team and said it should be
easy to reach agreement on return of frozen assets to Iraq --
if there is an accommodation on the Central Bank's USD 1.3
billion in accumulated claims on the Iraqi Central Bank.
Muasher acknowledged that Jordan may well only get the trade
ledger money over the course of many years, but said that
strong parliamentary and budgetary pressures required Jordan
to reach agreement on this subject before it can return all
of the frozen assets. U.S. and Iraqi acknowledgment of the
existence of the Central Bank claims and their unique
character may suffice as an initial step. END SUMMARY.

-------------- --------------
(ANOTHER) FORMAL REQUEST TO ADDRESS TRADE LEDGER DEBT
-------------- --------------


2. (S) Foreign Minister Marwan Muasher told the Ambassador
November 19 that the Council of Ministers had instructed him
to request formally that the U.S. send to Jordan a USG-Iraqi
team empowered to address both Iraqi assets frozen in Jordan
and the status of the Central Bank of Jordan's USD 1.3
billion claims on Iraq. Muasher said the "trade ledger" is
"a fundamental issue for us" and must be addressed. This
amount is not from loans, he argued, but represents overdue
payments for goods delivered to Iraq. The previous Iraqi
government had recognized this obligation, and the new
government should honor that commitment. Noting that he and
other senior GOJ officials had first raised this issue in
Washington in October 2002, he said the GOJ believes that it
asked for and got from both U.S. and Iraqi officials earlier
this year commitments to send a team empowered to address
both issues.


3. (S) Muasher said Jordan wants to solve this issue
amicably, as a friend and ally. As the GOJ had informed us,
Jordan will continue to transfer USD 150 million of frozen
assets to the Development Fund for Iraq (DFI) while working
out an accommodation on the Central Bank claims. Jordan
realizes that it may well only get the money over a period of
years. Nevertheless, he argued, Jordan needs an arrangement
for both political and economic reasons.


4. (S) On the political side, Muasher said that the new
Parliament will ask in December what has happened to the
frozen Iraqi assets and the trade ledger. "I cannot tell
them that we have a commitment to give back the frozen assets
without an agreement on the 1.3 billion dollars as well." On
the economic side, Muasher argued that 2004 will be a
difficult budget year for Jordan, and having to write off a
USD 1.3 billion asset is a cost that the GOJ cannot sustain
under any circumstances.

--------------
TREASURY TEAM GOOD ON WHAT IT COULD DO
--------------


5. (S) Muasher thanked the Treasury Department for
dispatching a team to discuss frozen assets, asserting that
it will not be difficult to reach closure on a plan for
transferring all remaining assets to Iraq -- as long as there
is accommodation on the trade ledger. However, he concluded,
without an arrangement on that account, Jordan will be unable
to move further on the frozen assets than has already been
committed.

--------------
COMMENT
--------------


6. (S) Embassy believes that the Treasury team sent this
week to Amman did an excellent job in the areas in which it
was empowered to act. However, it was unable to address
Jordan's main concern, and, consequently, did not close a
deal. Senior Jordanian officials believe they got from
Washington earlier this year a commitment to address their
trade debt concerns. We understand the manifold difficulties
of addressing the issues at this time and our strong desire
not to link the assets and trade ledger issues. Nonetheless,
as close allies with common interests, we should try to show
the Jordanians that we understand and take very seriously
their valid political and economic concerns. As one of
Jordan's key economic and political partners, we have a real
stake in how these claims are disposed of. It may be enough
initially for the new Iraqi government and the United States
to acknowledge clearly the existence of this obligation --
which was annually reconciled by the Jordanian and former
Iraqi governments, most recently in December 2002 -- as well
as its unique character.


7. (U) CPA Baghdad minimize considered.

Visit Embassy Amman's classified website at

http://www.state.sgov.gov/p/nea/amman/

or access the site through the State Department's SIPRNET
home page.
GNEHM