JORDAN: FROZEN IRAQI ASSETS, MEETING WITH FINANCE

C O N F I D E N T I A L SECTION 01 OF 02 AMMAN 008162 SIPDIS TREASURY ALSO FOR JUAN ZARATE, ABIGAIL DEMOPULOS CPA FOR OLIN WETHINGTON E.O. 12958: DECL: 12/14/2008 TAGS: EFIN ETTC PREL IZ JO SUBJECT: JORDAN: FROZEN IRAQI ASSETS, MEETING WITH FINANCE MINISTER REF: A. AMMAN 7830 ¶B. AMMAN 7805 ¶C. AMMAN 7691 ¶D. STATE 341010 Classified By: Ambassador Edward W. Gnehm. Reasons 1.5 (b) and (d). ¶1. (SBU) Summary. Jordan's Finance Minister told a visiting CPA official that Jordan would accelerate transfer of Iraqi assets frozen in Jordan to the Development Fund for Iraq and agreed on a mechanism for joint Jordanian-Iraqi assessment of commercial claims against those assets. However, the Minister said he would need to check if he could stop paying individual claims not jointly agreed to be valid. Abu Hammour also asked for instructions on how to deal with a $100 million account in the name of the Jordanian oil refinery that appeared to be used for the benefit of the Iraqi oil ministry. End Summary. ¶2. (SBU) Taking advantage of his presence in Amman to participate in meetings with the IMF, CPA advisor Haydar al-Uzri and ECON/C called on Jordanian Finance Minister Abu Hammour the evening of December 11 to discuss Iraqi participation in the evaluation of Jordanian claims against the $500 million in Iraqi assets frozen in Jordanian banks. The manager of the Amman branch of Rafidain Bank also joined the meeting. -------------- ACCELERATED TRANSFERS TO DFI -------------- ¶3. (SBU) Abu Hammour confirmed Prime Minister Fayez' promise to A/S Burns (ref B) to accelerate transfer to the Development Fund for Iraq (DFI) of "the free balance" of frozen assets (i.e. the share of the $500 million not subject to claims by Jordanian banks and businesses). Abu Hammour said that the next large payment would be made January 2 or 3, with another one in early February. He didn't state an amount, but suggested that the payments would be more than the $35 million installments and the $150 million total previously discussed. -------------- INVOLVING IRAQIS IN ASSESSING CLAIMS -------------- ¶4. (SBU) Regarding Iraqi participation in the process of assessing the validity of claims against the frozen assets, Abu Hammour committed to prepare a matrix of pending unpaid claims. He said that there were about 250 such claims and that it would take up to a month to complete a matrix, which would identify the claim, the amount, and the Jordanian and Iraqi parties. Using this information, al-Uzri believed the Iraqi side would be able to identify the right people and files on the Iraqi side who could come to Jordan to provide the relevant information to Jordanians for evaluating the claims. ¶5. (SBU) Pushed by al-Uzri and ECON/C for a speedy process that would involve Iraqis, Abu Hammour agreed to check with Prime Minister Fayez on two points: a) whether he could accept help from the Rafidain branch in lending staff members to help speed up preparation of the matrix; b) whether he could agree not to pay out further claims that have not been individually vetted with the Iraqi government. Al-Uzri noted that the Rafidain branch could be very helpful in speeding up the claims checking process. For example, in many cases, the branch had actual payment orders from Baghdad that it had not been able to execute because of the war. ¶6. (SBU) As a second step, Abu Hammour said his staff would prepare a similar matrix of the about 170 already-paid claims that would be shared with the Iraqis. He also said that $2-3 million in claims had been paid since his November 17 meetings with Juan Zarate in Amman (ref C),bringing the total already paid out to about $120 million. -------------- -------------- NEED FOR "SOMETHING" ON $1.3 BILLION TRADE LEDGER -------------- -------------- ¶7. (C) Saying the two issues were "not linked," Abu Hammour said that he hoped Iraq could be responsive to the Jordanian government's need to be able "to show something to parliament on the $1.3 billion." One of two things could do this: a) a renewal of the annual trade protocol, or b) a letter from the Iraqi government recognizing that the $1.3 billion is not a debt but funds in a clearing account not subject to the Paris Club that would be dealt with "later." Abu Hammour said "later" could be vague: it could be one, two, three or ten years; what he wants/needs is to show the Central Bank's external auditors that "this is not a bad debt." He said he looked foward to discussing this subject with "a U.S. team." -------------- OIL ACCOUNT -------------- ¶8. (SBU) Finally, Abu Hammour alerted al-Uzri to the existence of an account at the Jordan National Bank in the name of the Jordan Petroleum Refinery Company (JPRC) that contains JD 75 million ($106 million). Drawings on the account require signatures of the JPRC and of the Iraqi Ministry of Oil. The purpose of the account is to procure equipment for the Iraqi Oil Ministry with the source of the funds being oil sold to Jordan. Abu Hammour said that this account had been frozen but that it was not part of the $500 million (he said he was "99% sure" of the latter). ¶9. (SBU) Abu Hammour said he had been approached the day before by a representative of the Iraqi Oil Ministry who said that the ministry wanted to use the account to purchase oil equipment. The representative had a July letter to this effect from the Oil Ministry's Thamir Ghadhban and a CPA oil advisor. Abu Hammour told al-Uzri that if he received a letter from the Iraqi Oil Ministry identifying persons authorized to sign on its behalf, he would have no legal choice but to allow use of the account. On the other hand, if he were asked by the Iraqi Finance or Oil Minister to turn the funds over to the DFI, he would also be prepared to do so. Al-Uzri said he would seek guidance. -------------- COMMENT -------------- ¶10. (C) Agreement on a mechanism for jointly evaluating the claims with Iraqis in a position to know the details should expedite transfers to the DFI. We will want to keep the pressure on to meet the discussed timeframe. Abu Hammour's need to check on not paying claims that have not been agreed with Iraqis is troublesome given discussions in Washington the week before. However, there is a distinct possibility that Abu Hammour was not fully briefed on those discussions. It is also possible that the additional $2-3 million in claims were paid in the two plus weeks between the Zarate and Washington meetings. Per ref D, post will follow-up on this point with senior Jordanian officials, as well as on taking advantage of Rafidain's help from in preparing the matrices. GNEHM