JORDAN'S FINANCE MINISTER ON IRAQI ASSETS

C O N F I D E N T I A L SECTION 01 OF 03 AMMAN 005726

SIPDIS

E.O. 12958: DECL: 07/06/2014
TAGS: EAID EFIN PREL ETRD JO IZ
SUBJECT: JORDAN'S FINANCE MINISTER ON IRAQI ASSETS
TRANSFER, DEBT ISSUES, KUWAITI AID, FUEL SUBSIDIES, AND
OTHER ISSUES

REF: AMMAN 05399

Classified By: Amb. Edward Gnehm, Jr. Reasons 1.5 (b) and (d).


1. (C) SUMMARY: Jordan's Finance Minister Abu Hammour
related to the Ambassador July 5 that he expected all claims
on Iraqi frozen assets to be settled by mid-July and the
balance remaining transferred to Iraq. On other Iraqi
issues, Abu Hammour reported that Jordan had still not heard
from Iraqi finance officials regarding the $1.3 billion
Central Bank of Jordan trade claim on Iraq. He had discussed
the issue during the recent visit of the Iraqi Foreign
Minister, but there had been no further developments. On the
border charges imposed recently (reftel),Abu Hammour said
that King Abdullah had decided to exempt Oil For Food program
trucks from the diesel fuel supplement charges and the truck
handling fee charges. In addition, Jordan is in the process
of establishing a public free zone on the border with Iraq
where goods can be delivered from Aqaba and picked up by
Iraqi truckers.


2. (C) On other issues, Abu Hammour had just returned from
France and provided details on his discussions with both the
Paris Club and the French government. He also revealed a
secret agreement through which Jordan will receive cash

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equivalent to 25,000 barrels of oil/day for three years.
News of the agreement, already approved by Kuwait's Council
of Ministers, was leaked in Kuwait and Abu Hammour has
already had to fend off Jordanian deputies seeking increased
social spending. END SUMMARY.

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IRAQI ASSETS
--------------


3. (C) During the Ambassador's July 5 farewell call,
Jordan's Finance Minister Mohammad Abu Hammour said that he
had just had a meeting the same day on the Iraqi frozen
assets issue. Almost all commercial claims against those
assets had been settled. Abu Hammour expected that the final
meeting of the committee would be held in mid-July "to close
the books." Jordan would then be able to transfer the
remaining balance to Iraq. Abu Hammour said he expected that
balance to be under $50 million, probably in the $30-$40
million range. On the issue of the $1.3 billion Central Bank
trade protocol claim on Iraq, Abu Hammour said he had raised
the issue with visiting Iraqi Foreign Minister Hoshyar Zebari
in June, but there had been no subsequent contacts and no
progress on the issue.

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BORDER CHARGES CUT FOR O.F.F. TRUCKS; FREE ZONE
TO BE ESTABLISHED
-------------- --


4. (C) In response to a question from the Ambassador, Abu
Hammour reported that the King had decided to lower the fees
on trucks going to Iraq. In particular, Oil For Food trucks
would be exempted from the 80 JD ($112) diesel fuel
supplement charges and from the 150 JD ($210) truck handling
fee charges. The OFF trucks would be exempted from "95% of
the duties" and would be subject only to the 5 JD ($7)
departure tax per traveler and the 10 JD ($14) annual
passport fee on all public transportation vehicles.


5. (C) In addition, Abu Hammour stated that the government
had decided to establish a public free zone on the border
with Iraq. The zone would be 5,000 dunums in size (1,235
acres) and goods could be transshipped from the port at Aqaba
to the zone for pick up by Iraqi truckers. (NOTE: Other
government officials report that the GOJ intends a
significant expansion of facilities on the Jordan-Iraq border
to enable both persons and goods to transit the border more
efficiently. END NOTE.)

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KUWAITI OIL
--------------


6. (C) Abu Hammour confirmed breaking news of a new Kuwaiti
oil grant of 25,000 barrels of oil per day for three years.
A U.S. company, Free Market Petroleum, would lift the oil
from Kuwait and, since the Kuwaiti crude is not compatible
with Jordan's refinery, the oil would be sold by Free Market
and the proceeds passed to Jordan's Finance Ministry. Abu
Hammour expected the deal to be worth $1 billion. (NOTE: The
Kuwaiti Ambassador in Jordan told the DCM a different version
of the story: Kuwait would sell its crude, pass the revenue
to Free Market Petroleum, which would in turn purchase crude
suitable for use in Jordan's refinery. END NOTE.)

7. (C) The deal was approved by Kuwait's Council of
Ministers and Jordan had been notified of the decision in a
secret letter. Although intended to remain secret, news of

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the arrangement had already leaked in Kuwait's Parliament.
To Abu Hammour's chagrin, several deputies of the Islamic
Action Front had already approached him upon hearing the
news. They asked Abu Hammour to increase social spending in
a number of areas, including in government salaries and
pensions. In trying to fend off the deputies, Abu Hammour
explained to them his need to cover the fuel subsidies as one
reason he could still not increase spending. He said
revenues generated by the Saudi grants (50,000 barrels/day)
just covered the fuel subsidies and the costs of health
insurance coverage for children. He also reminded them that
there was a long lag time between lifting the oil and Jordan
receiving the proceeds from its sale. Abu Hammour said he
had convinced the delegates to delay making the deal public
until the next ordinary session of Parliament in the fall.
(COMMENT: Since this conversation, concern over possible
corruption, i.e., how these funds will be handled, has
dominated public discussion--See Septel. END COMMENT)


8. (C) Abu Hammour said that he was also hopeful that a
similar deal would soon be forthcoming from the UAE. He said
that the Saudis had been the leader of this effort to support
Jordan and that he expected the UAE would likely follow the
Kuwaiti lead. His main concern at this point remained
follow-through: last year the Kuwaitis had promised six
months of support but had only delivered three. They still
owed Jordan $60 million under the program.

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STRATEGIC PLAN TO REDUCE FUEL SUBSIDIES
--------------


9. (C) Regarding the strategic plan to eliminate all fuel
subsidies within three years, Abu Hammour said that
implementation of subsequent phases was still being
coordinated with the Ministry of Transport. It should be
complete within one to two months. He said that for the
moment, the diesel subsidy was still needed. However, the
new plan would change the formula based on mileage and load
weight in order to better balance the subsidies for different
sizes of trucks.

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DEBT ISSUES
--------------


10. (C) Abu Hammour began a discussion of debt issues by
noting that Jordan had just graduated from its IMF program on
Friday (July 2). He mentioned that he had recently returned
from Paris where he had met with officials at the Paris Club,
France Telecom, and the French Development Agency. In his
discussions with the Paris Club, he had noted Jordan's
commitment not to go the Paris Club for debt relief in the
future. However, he remains concerned about Jordan's debt
situation. He is hoping for creditors to help Jordan,
perhaps by allowing Jordan to raise its debt swap ceiling
from 30% to 50%. While in Paris, he discussed a bilateral
debt swap with the French government but finds the procedures
very complicated.


11. (C) He discussed a number of possible projects with the
French. He gained approval for $2 million in funding for a
project to link all Finance Ministry directorates with the
Ministry's headquarters. Abu Hammour said other projects had
also been approved but provided no details. He remains eager
to speed up this process, implying frustration with French
bureaucracy, contrasting this with his satisfaction with the
cooperation he has received from USAID in Jordan.


12. (C) Abu Hammour discussed a number of other projects
with creditors at the Paris Club. He explained that
fluctuations in the euro had hurt Jordan's debt/GDP ratio.
He hoped to be able to draw on the excess liquidity in
Jordan's banking system to address the problem. He had
expected the creditors to object to this plan but, to his
surprise, they had instead agreed to consider it and discuss
it with other creditors.


13. (C) Abu Hammour provided the Ambassador with a copy of
a letter on debt issues which he sent to the President of the
Paris Club as well as a Ministry paper, "Jordan--Public Debt
Reduction and Strategy to Achieve the Public Debt Law
Targets." Post will fax both to NEA/ARN.

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

14. (C) Despite his concerns about Jordan's current
debt/GDP ratio, Abu Hammour can bask in the current strength
of Jordan's economy. He continues to succeed in holding off
requests for higher government spending, both from other
ministers and from Parliamentary deputies. Certainly,
Jordan's graduation from its IMF program, as well as the
IMF's praise of his handling of the economy, helps solidify
Abu Hammour's reputation as a capable and dedicated
technocrat.


15. (C) Regarding Iraqi assets, the settling of claims
against the frozen assets is taking longer than originally
predicted by Abu Hammour. Nevertheless, Jordan will soon
transfer a substantial sum to Iraq, in addition to the $250
million already transferred. The delay could bring benefits
in that the transfer will help Jordan establish good
relations with the new Iraqi government and could also help
jump-start its discussions with Iraq on settling the $1.3
billion Central Bank claim.


GNEHM