JORDAN: TRANSFER OF FROZEN IRAQI ASSETS

C O N F I D E N T I A L SECTION 01 OF 02 AMMAN 008205

SIPDIS

STATE ALSO FOR A/S WAYNE
NSC FOR EDSON/KIFAYAT
TREASURY FOR J. ZARATE, A. DEMOPULOS
CPA FOR OLIN WETHINGTON, JOHN VARDOMON

E.O. 12958: DECL: 12/15/2008
TAGS: EFIN ETTC PREL IZ JO
SUBJECT: JORDAN: TRANSFER OF FROZEN IRAQI ASSETS

REF: A. AMMAN 8162

B. SECSTATE 341010

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


1. (C) Summary: During multiple conversations on December
15, I obtained renewed assurances from the Prime Minister
(and affirmed by the Finance Minister) that no further
payments would be made against claims for a finite period of
time. The PM also affirmed that all Jordanian claim files
would be open to Iraqi representatives to enable them to
assist validation of claims. The Finance Minister committed
to transferring $100 m to the DFI at the beginning of
January, with an additional amount before the end of the
month. He further pledged to expedite the review of claims
to permit a full transfer of the balance of frozen Iraqi
finds as rapidly as possible. Both the PM and Finance
Minister urged USG assistance in getting a designated group
of Iraqis to Amman ASAP to launch the claims review. To
prepare for such a team, Abu Hammour agreed to begin working
immediately with the local branch of Rafidain Bank. End
Summary


2. (C) On December 15, following up on earlier
conversations (ref A) and as instructed in ref B, I spoke
with both Finance Minister Abu Hammour and the Prime Minister
in an effort to clarify GOJ position on the entire issue of
the transfer of frozen Iraqi assets in Jordan. In our first
conversation, I told the Finance Minister that Minister of
Planning Awadallah in Washington had informed the USG at the
White House and at Treasury that the GOJ agreed to the
participation of representatives of Iraq in the review
process of claims by Jordanians against Iraq. Further,
Awadallah had affirmed a GOJ decision to make no further
payments to claimants until there was such Iraqi
participation. We could not therefore understand his remarks
to USG and CPA officials (ref A) that payments had not been
stopped.


4. (C) Abu Hammour said he was not informed about
Awadallah's conversations in Washington; neither Awadallah
nor the Prime Minister had discussed those conversations with
him. This surprised him since he is the chair of the
ministerial committee in charge of the issue and Awadallah is
not a member of the committee. He would go back to them
immediately. In the meantime, he told me he was ready to
transfer $100 million to the DFI on the first working day of
the new year. When I told him this would fall short of the
earlier $150 million commitment, he said he could make a
further transfer of $50 million, or perhaps more, before the
end of the month. This would bring the total to at least
$185 million. (Abu Hammour seemed to be doing the sums in
his head as we spoke. He said he could not make another
transfer before December 31 because he wanted to be able show
credit rating agencies a high level of yearend foreign
reserves, having spent $500 million in December to prepay
Brady bonds and conclude a $70 million debt swap with the
British.)


5. (C) Abu Hammour also repeated his need to protect the
$1.3 billion central bank claim. He understood that this was
not linked to the frozen assets and that the United States
saw this as an issue for the Iraqis. The Central Bank's
auditors could be satisfied by either renewal of the annual
trade protocol (which he recognized was unlikely) or a letter
from the Iraqis stating that the claim was not a debt but a
clearing account and would be settled "later." He still
hoped a U.S. mission could come soon to follow-up on this
issue.


6. (C) He also told me that he had received a letter from
the Iraqi Oil Minister regarding its $100 million joint
account with the Jordanian oil refinery that is not included
in the $500 million in frozen accounts subject to claims.
The letter (emailed to CPA, NEA and Treasury) identified
Iraqis authorized to sign on behalf of the Oil Ministry. As
he said he had told CPA advisor Haydar al-Uzri on December 11
(ref A),Abu Hammour said he had no legal choice but to
proceed as requested by the Oil Minister. To be absolutely
certain that the U.S. is not going to make an issue of this,
he would like to hear back from us as soon as possible.


7. (C) Shortly after getting off the phone with Abu
Hammour, I took a call from the Prime Minister, who had just
spoken to Abu Hammour. The PM told me he had reluctantly
agreed not to pay any more claimants out of the frozen assets
until an Iraqi team came to Amman to review the records. He
said this was not an indefinite pledge -- a team needed to
get started "within a week." He was ready to give the Iraqis
full access to all Jordanian files and records on the claims,
but the process had to be expedited, which would also speed
up transfers to the DFI.


8. (C) Abu Hammour called back to tell me that he had
convinced the PM to involve the Iraqis in assessing the
claims, starting with working with the Rafidain branch. But,
he said he was under constant, intense pressure from
claimants. Therefore, he said he needed an Iraqi team to
come to Amman ASAP to look at the records. Referring to the
ref A conversation with al-Uzri, he said he couldn't wait
more than two to three weeks for this to happen (a slightly
longer timeframe than the PM's). He said he had talked to
Awadallah on the issue of not paying out more claims and that
Awadallah confirmed my description of the Washington
conversations. Repeating what the Prime Minister had just
told me, he said no more claims would be paid without Iraqi
participation in the process, provided an Iraqi team could
arrive soon. In any case, he thought the amount of claims
remaining would prove relatively small.


9. (C) Comment. Jordanian decision-makers are gaining a
clearer picture of U.S. requirements, now that all the key
Jordanian players are in the same city and are hearing
directly from me our understandings, juxtaposed against
Awadallah's accounts of Washington conversations. All the
key players now agree to work fully with the Iraqis and not
pay out any more funds without their involvement for a finite
period of time, as well as with relatively large transfers to
the DFI (within the four month timeframe they have been
using).


10. (C) Involving the local Rafidain branch should
jump-start the claims review. The branch says it has key
documents that will dispose of some claims quickly. They
should also be able to work with Baghdad to identify the
right composition of an Iraqi team. It is in our interest,
as well as that of the Jordanians and Iraqis, to seize this
moment and move forward quickly. In particular, we need to
work with CPA and the Iraqis to get a team here ASAP, using
military air transport if necessary and understanding that
more than one visit might be required.


11. (C) Without delay, Rafidain should instruct its Amman
branch to contact Abu Hammour immediately to begin working
with his staff in cataloguing, categorizing, and disposing of
claims as possible, preliminary to the arrival of a team from
Baghdad before the end of the month at the latest. We should
also get back to Abu Hammour quickly about the $100 million
joint oil account. Finally, in order to deal with the $1.3
billion issue, we need to encourage a separate Iraqi team to
come to Amman, as we indicated to the Jordanians in
Washington that we would do. This remains their biggest
economic and political interest in all of this.
GNEHM