US embassy cable - 04AMMAN3430

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