US embassy cable - 04AMMAN3488

C O N F I D E N T I A L AMMAN 003488 
 
SIPDIS 
 
E.O. 12958: DECL: 05/05/2014 
TAGS: EPET, ECON, EFIN, JO, SA 
SUBJECT: FREE SAUDI OIL FOR ANOTHER YEAR!  OR MAYBE NOT... 
 
REF: AMMAN 3328 
 
Classified By: Charge d'Affaires David Hale for reasons 1.5 (b) and (d) 
 
1. (C) SUMMARY: The GOJ announced yesterday that Saudi Arabia 
will provide Jordan with free oil for another year. 
Unfortunately, this public announcement may well endanger 
Jordan's informal accord with the publicity-shy Saudis.  If 
the oil deal falls through, Jordan still faces a bleak 
budgetary picture, and its spokesperson can add another gaffe 
to a lengthening list.  Related rumors of Kuwaiti and UAE 
financial commitments appear to remain uncertain. END SUMMARY. 
 
2. In a press conference held May 5, 2004, Minister of State 
and official GOJ spokesperson Asma Khader announced that 
Jordan has secured a commitment from Saudi Arabia to continue 
its grant of crude oil to Jordan, which had been planned to 
expire April 1, 2004, for another year.  Jordanian press also 
reported that talks were under way to secure further grants 
to Jordan from Kuwait and the UAE. 
 
3. (C) Minister of Finance Mohammed Abu Hammour, in a May 6 
meeting with Charge, confirmed that Muasher had been able to 
secure a verbal commitment from Crown Prince Abdullah that 
Saudi Arabia would continue to give the government of Jordan 
the equivalent of 50,000 barrels per day, approximately half 
its current consumption, for another year (the Jordanians 
would only have to pay the transportation costs).  Abu 
Hammour stated, however, that the publicity-shy Saudis had 
all along expressed their strong preference that oil deals 
not be publicized.  He worried that Khader's statement to the 
press might cause the Saudis to go back on their commitment, 
which in any case had never been put into writing.  It also 
risked fueling a public mood of hostility toward recent 
austerity measures. 
 
4. (C) Abu Hammour noted that the prospect of a windfall had 
substantially increased pressure on him at the most recent 
Cabinet meeting to authorize further spending and soften 
revenue collection.  Abu Hammour instead took the position 
that as oil prices are substantially higher than the 
projections on which the government's budget had been based, 
Jordan's budget would require extra revenue or spending cuts 
totaling JD 20 million ($28 million) even with a Saudi grant 
(Reftel).  Exemplary of the tone of the meeting was Minister 
of Planning Bassem Awadallah's suggestion that Jordan take 
this opportunity to eliminate the income tax; to which Abu 
Hammour retorted that as the Planning Ministry's budget was 
roughly the same size as income tax revenues, the two could 
be eliminated together. 
 
5. (C) Abu Hammour also passed on a cryptic statement by 
Prime Minister Faisal Al-Fayiz that the governments of Kuwait 
and the UAE are on the verge of making a JD 1 billion ($1.4 
billion) grant to Jordan over the next three years to cover 
the cost of Jordan's remaining oil import needs. (Jordan 
currently imports approximately 110,000 barrels of crude, or 
its equivalent in oil products, per day.)  He felt that such 
a grant would be highly unlikely. 
 
6. (C) COMMENT: If the Saudis do in fact deliver on their 
verbal pledge to provide Jordan with free oil through April 
2005, it will close most of the remaining hole in Jordan's FY 
2004 budget.  If the Saudis fail to come through, Jordan is 
in a bind.  We share Abu Hammour's doubt that the supposed 
billion-dinar grant from Kuwait and UAE has substantial basis 
in fact, especially given Jordan's past difficulty in getting 
the two nations to honor the commitments they had made to 
subsidize oil purchases. 
 
7. (C) COMMENT (Cont.) Khader's endangerment of the 
Saudi-Jordanian verbal accord is the latest in a string of 
gaffes, which have included angering Parliamentarians by 
stating that parts of their salaries were paid by foreign 
grants and, within the past week, causing a small run on the 
Jordanian dinar by making an unprompted announcement that 
Jordan would continue to support the currency's peg to the 
dollar.  END COMMENT. 
HALE