Identifier
Created
Classification
Origin
04AMMAN3430
2004-05-05 17:23:00
CONFIDENTIAL
Embassy Amman
Cable title:  

JORDAN: UPDATE ON IRAQI ASSETS

Tags:  EFIN ETTC PREL IZ JO 
pdf how-to read a cable
This record is a partial extract of the original cable. The full text of the original cable is not available.

051723Z May 04
C O N F I D E N T I A L SECTION 01 OF 02 AMMAN 003430 

SIPDIS

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

E.O. 12958: DECL: 05/05/2014
TAGS: EFIN ETTC PREL IZ JO
SUBJECT: JORDAN: UPDATE ON IRAQI ASSETS


Classified By: CDA DHALE for Reasons 1.5 (b) and (d).

C O N F I D E N T I A L SECTION 01 OF 02 AMMAN 003430

SIPDIS

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

E.O. 12958: DECL: 05/05/2014
TAGS: EFIN ETTC PREL IZ JO
SUBJECT: JORDAN: UPDATE ON IRAQI ASSETS


Classified By: CDA DHALE for Reasons 1.5 (b) and (d).


1. (C) SUMMARY: Jordanian Finance Minister Abu Hammour
told us that to date $170 million in frozen Iraqi assets had
been released to settle Jordanian commercial claims, with an
additional $60 million agreed for release last week. ($235
million has been transferred to Iraq to date.) He said the
recent payments were made only after Rafidain Bank in each
instance had provided a &clearance8 from potential Iraqi
counter-claimants. Abu Hammour undertook to provide the
Embassy complete background information on these paid claims
within ten days and that payments would be returned if any
are found to be fraudulent. He asserted that this move
protected Iraqi interests and the stability of Jordan's
banking sector. Remaining outstanding claims, estimated to
value $30 million &at the maximum,8 were under review, and
the GOJ hoped to complete the process by mid June. Abu
Hammour agreed to transfer this month any frozen assets in
excess of these outstanding claims. Charge will see Abu
Hammour later this week t
o nail down that amount, over which there was a lack of
clarity. Abu Hammour reiterated his desire to host an Iraqi
team to review the claims in detail. END SUMMARY.


2. (C) In a May 4 meeting with Charge, Iraqi Finance Ministry
advisor John Vardaman, and Iraqi officials, Jordan's Finance
Minister Mohammad
Abu Hammour reviewed the history of Jordan-U.S.-Iraq
discussions on the protection of Iraqi assets in Jordan as
well as of the interests of Jordanian claimants. He
acknowledged that ministerial committee review of Jordanian
claims was ongoing, with the intention to complete the
process by mid-June 2004. No claims presented after
September 2003 had been accepted. Payments to date to
Jordanian claimants totaled $170 million; another $60 million
in payments were approved last week. When challenged by the
Charge that this action was inconsistent with our agreement
that no further payments would be made pending Iraqi review
of the claims, Abu Hammour made several points:


--Jordan took this action to settle the credit lines of
Jordanian commercial banks, which must pay interest on these
accounts. There was a real fear that Jordan,s banking
sector was at risk if these payments were not made.

--The committee was acting very conservatively. The
government has settled only those claims which are supported
by ten required documents. Furthermore, the recent payments
had been &cleared8 through Rafidain Bank with the potential
counter-claimants in Iraq. He judged the risk of fraud to be
low.

--The payments were being made to commercial bank claimants
only. Abu Hammour maintained that the Central Bank of Jordan
had &guarantees8 from those banks that the money would be
re-paid in full should official Jordanian-Iraqi review of the
claims indicate fraud or error.

--Abu Hammour agreed to provide full background details on
paid claims to the Embassy within ten days, to share with
Iraqi authorities.


3. (C) Vardaman regretted that Iraqi ministerial review of
the claims had taken longer than expected, and assured Abu
Hammour that a review team would travel to Amman as soon as
possible to close the books. Abu Hammour welcomed the idea,
noting that it should include Finance, Trade and Industry,
and Central Bank officials. Vardaman noted that the UNSCR
1483 calls for the transfer of frozen assets to the
Development Fund for Iraq (DFI),with payment to claimants to
be made only later after review by the new Iraqi government.
Abu Hammour said that his government could not tell
Jordanians with claims to go to Iraq to get their money, as
the process would take years. The interest accrued would
greatly surpass the amounts of the original claims. Jordan
preferred to settle the claims here and then re-pay the full
amount if problems are discovered with the claims after
further review in coordination with Iraq. He said Jordanians
realize they will never recover the full amounts they claim.
However, Jordan has
already been
waiting six months for the Iraqi mission. Whenever the Iraqi
mission does come, the government will share all the
information and guarantee full payments if claims are shown
to be fraudulent.


4. (C) In reviewing the status of the Iraqi assets, Abu
Hammour provided the following estimated figures:

Total frozen assets: $620 million ($550 million plus $70
million of SOMO assets).

Transfers to date to DFI: $235 million.

Paid to Jordanian claimants: $170 million, with an
additional $60 million agreed for payment.

Maximum value of potentially valid outstanding Jordanian
claims: $30 million.

Abu Hammour said Jordan intended to complete review of those
outstanding claims by mid-June. When asked by Vardaman, Abu
Hammour agreed that the excess balance above the $30 million
would be transferred to DFI this month, pending agreement by
the ministerial review committee. He estimated that figure
to be between $70 and 120 million. Note: He was clearly
including Rafidain,s paid-in capital of $60 million in that
higher end estimate. One of the Iraqi Finance Ministry
officials noted to us later that Iraq would not be interested
in bringing those funds back to Iraq, preferring to leave
them in Jordan as operating capital for Rafidain. In a
follow-up conversation, the Finance Ministry's Secretary
General said that the committee review was ongoing and the
figures provided by the minister about the remaining balance
should be regarded as general in nature. He promised to
provide the final figures once the committee review of this
possible transfer was complete, hopefully this week. He was
unwilling to a
gree that the amount available for transfer to Iraq would be
between $70-120 million. End Note.)


5. (C) A discussion ensued about the $1.3 billion Central
Bank claim on Iraq, including a lively exchange with Saladin
Giata, one of the Iraqi finance officials, as to whether the
amount constituted a sovereign debt or, as Jordan insists,
&clearing account8 monies. Giata asserted that not all of
the $1.3 billion in trade claims on the Central Bank of Iraq
were covered by the Jordan-Iraq trade protocol and those
funds should therefore be considered debt. Abu Hammour
insisted that the funds were part of a clearing account, not
sovereign debt, as there had been no loan agreement. He
reviewed the history of the accumulation of this account over
the years in familiar, previously reported terms. If the
funds were to be considered debt, Abu Hammour asserted
the IMF would then require Jordan to bring the amount before
the Paris Club. (Separately, Central Bank Governor Touqan
said that if the amount constituted sovereign debt, then his
bank was in violation of the law, as it had no authority for
such loans.) Abu Hammour added that in the past, Jordan
pointed to the trade protocol with Iraq to explain the nature
of the account to external auditors. Without an agreement
with Iraqi on the disposition of the funds, or some Iraqi
letter of explanation, Jordan had a a balance sheet problem.
It would be under pressure to make provisions to
re-capitalize the $1.3 billion or fail the next audit. The
Finance Ministry did not have the resources to cover this
amount.


6. (C) Comment: We have two commitments from Abu Hammour:
a) to provide an accounting on the unfortunate, recent
payments to Jordanian commercial claimants and b) to transfer
those assets which exceed outstanding claims of $30 million
under review. Charge will see Abu Hammour soon to clarify
what that amount will be.


7. (U) John Vardaman cleared this message in draft.

HALE
HALE