JORDAN'S FINANCE MINISTER ON IRAQI ASSETS, IRAQ

C O N F I D E N T I A L SECTION 01 OF 02 AMMAN 006249

SIPDIS

STATE FOR NEA/ARN
TREASURY FOR ZARATE, MILLS, DEMOPULOS

E.O. 12958: DECL: 07/21/2014
TAGS: EFIN PREL ETRD IZ JO
SUBJECT: JORDAN'S FINANCE MINISTER ON IRAQI ASSETS, IRAQ
OIL PIPELINE AND PROPOSED OIL-FOR-DEBT SWAP

REF: A. AMMAN 6173

B. AMMAN 5726

C. AMMAN 5399

D. AMMAN 4670

E. AMMAN 3801 AND PREVIOUS

Classified By: CDA DAVID HALE. REASONS 1.5 (B, D)


1. (C) SUMMARY: Minister of Finance Mohammad Abu Hammour
July 21 told the Charge that the final payment to DFI of
Iraqi assets would be about USD 50 million, but averred he
did not know the precise number. He noted the cabinet had
released the Rafidain Bank's USD 84 million in operating
capital. He also outlined new Jordanian-Iraqi aid, trade and
investment initiatives, including a proposed crude oil
pipeline from Iraq's north (ready 2007-2008 at the earliest)
and an oil deal whereby a portion of Iraq's annual oil
delivery would pay down the Central Bank of Jordan's USD 1.3.
billion trade claim. He said a new Iraq-Jordan Higher Joint
Commission would be formed, and formally meet in three
months. Other projects noted include support for
refurbishment of the Iraqi border station at Trebil, and
financial training, all at the King's behest. END SUMMARY.

Iraqi Assets
--------------


2. (C) Charge called on Finance Minister to review the
recent visit of Iraqi Prime Minister Allawi as well as the
status of frozen Iraqi assets. Abu Hammour volunteered that,
in the wake of a recent visit from Iraq's Minister of
Finance, the cabinet had approved his proposal to release
Jordanian Dinar (JD) 60 million (USD 84 million) in operating
capital to the Amman-based Rafidain Bank. Abu Hammour then
recited the familiar figure of total assets returned of USD
250 million. Charge asked about the amount remaining to be
returned to Iraq. Abu Hammour first said that it would not
be more than USD 50 million, but quickly corrected himself to
say that it could be plus or minus that amount, as best he
thought. It could be a little bit more (than USD 50
million),he concluded. (COMMENT: Without account ledgers
in front of him, including the latest tallies of amounts paid
on approved Jordanian traders' claims, Abu Hammour is giving
his best-guess estimates to our queries. These are only
rough estimates, and not precise calculations. END COMMENT.)

Pipeline and Oil-for-Debt Swap
--------------


3. (C) Abu Hammour prefaced his comments on Iraqi
initiatives by noting a meeting King Abdullah had called
about two weeks ago in which the King asked relevant cabinet
members to help their Iraqi counterparts. In the context of
Iraq's USD 1.3 billion trade ledger account with Jordan, Abu
Hammour said that the two sides agreed first to talk about it
more. His suggestion to his counterpart was that, since
Jordan needed oil and there was a pipeline project being
proposed, perhaps they should think of a new "oil protocol".
This would be a new arrangement, he said, not necessarily
linked to the completion of the pipeline. Each year, Jordan
could use about USD 1 billion in crude oil from Iraq, he
noted. The proposal was that Jordan would receive that
valued amount in crude oil -- about USD 900 million paid at
prevailing market rates but with the remainder "paid" out of
the trade ledger account. The USD 1.3 billion would thus be
eliminated after 13 years. Abu Hammour said this proposal
has been presented to the Jordanian and Iraqi Prime Ministers
for consideration.


4. (C) Charge called on Minister of Energy and Mineral
Resources Azmi Khreishat the same day to inquire further into
the new oil pipeline. Khreishat noted that he and Iraqi Oil
Minister Thamer Al-Ghadhban had begun planning for the
construction of the crude pipeline from Haditha, in Iraq's
north, to Zarka, where the Jordanian refinery is located.
This proposal also is now before the two prime ministers.
The proposed pipeline would be scheduled for a 2007-2008
completion, which would allow time for the planned
modernization and expansion of Jordan's refinery to create
capacity large enough for the pipeline to make economic
sense. The feasibility studies for the line, completed prior
to the war, had envisioned a pipeline of wider diameter than
necessary to serve the refinery's needs, leaving space for
possible additional throughput if the pipeline were
eventually extended south to Aqaba. Iraq's Oil Ministry will
be sending technical experts in August to meet with the GOJ
Energy Ministry on future implementation of plans for this
pipeline.

Assistance Projects
--------------


5. (C) In addition to outlining the creation of a Public
Free Zone at the Jordan-Iraq border, and seeking ways to
expand exports to Iraq (Ref B),Abu Hammour noted the recent
allocation of a half million JD (USD 700,000) to the
Minister of Public Works to help with the refurbishment of
the Iraqi border station at Trebil, opposite Al Kerama. The
other side has nothing, he said, and Jordan wants to help the
Iraqis with new border checkpoint booths, including the
construction of a new lane for diplomats, VIPs, and
businessmen. He said that other proposals were being
considered in both construction and trade arrangements to
facilitate trade. He stressed that trade would be under "new
arrangements." He also mentioned his own proposal to the
Iraqi Minister of Finance to provide training to retail bank
and foreign exchange outlet personnel in Iraq. The banks
were really suffering in Iraq, he said he was told. The GOJ
was willing to do all that it could to train banking staff,
he noted. He referred again to the reduction of border fees
and taxes at the Jordan-Iraq border (Ref B).


6. (C) Like other Jordanian officials (Ref A),Abu Hammour
was upbeat in describing the PM Allawi visit, noting that a
press release had publicized the creation of the bilateral
Higher Joint Commission, headed by the two prime ministers
and covering key subjects such as finance, trade, energy and
other concerned ministries. The two sides are now preparing
the agenda for the first Higher Commission, he noted.

A Notable Exchange
--------------


7. (C) Abu Hammour said the highly cooperative and positive
tone of the Iraqis' visit was marred only by a public (and
entirely characteristic) power grab by Planning Minister
Bassam Awadallah -- who announced in front of both
delegations that Planning, not Trade, would be the focal
point for supporting the new bilateral Higher Commission. In
the absence of Trade Minister Halaiqa (in Algeria),Abu
Hammour as acting Trade Minister challenged this assertion.
The usually mild mannered Abu Hammour said he launched into a
five minute back-and-forth with Awadallah. Prime Minister
Faisal Fayez offered a classic (for him) Solomonic solution
by saying Planning would lead for three months and then Trade
would take over, when the formal Commission launch is to
occur. Abu Hammour told us this made no sense but with a
room full of Iraqis watching, finally decided he had to stop
arguing and acquiesced.
BAGHDAD MINIMIZE CONSIDERED
HALE