US embassy cable - 04AMMAN4426

C O N F I D E N T I A L SECTION 01 OF 03 AMMAN 004426 
 
SIPDIS 
 
NOFORN 
 
E.O. 12958: DECL: 05/31/2014 
TAGS: ETRD, ETTC, JO, IZ 
SUBJECT: STAFFDEL SCHARFEN MEETINGS ON OIL-FOR-FOOD 
 
Classified By: Ambassador Edward W. Gnehm for reason 1.5 (b) 
 
1. (SBU) SUMMARY: In a May 21-24 visit to Jordan, Staffdel Scharfen 
engaged in meetings with officials from the Iraqi government, 
CPA, Jordanian government, and the United Nations.  In these 
meetings the delegation dealt primarily with issues 
pertaining to Iraqi trade during the period of UN sanctions 
on Iraq, and particularly under the 1996-2003 Oil-for-Food 
(OFF) program.  The delegation also met with USG contractors 
on the subject of the Iraq Police Training Center. 
CPA-organized meetings with Iraqis will be reported through 
CPA channels.  END SUMMARY. 
 
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JORDANIAN AUDIT BUREAU 
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2. (SBU) Salem Al-Khazaleh, President of Jordan,s Audit 
Bureau, reviewed for the delegation the history and structure 
of the Bureau, which has a role theoretically similar to that 
of the GAO in the United States.  Khazaleh expressed the 
Bureau,s interest in improving its technical capabilities 
and thanked the delegation for the technical assistance and 
advice that the USG had provided to the Bureau in the past. 
The delegation asked Khazaleh about the Bureau,s role in 
monitoring funds coming in from Iraq.  Khazaleh replied that 
while the Audit Bureau,s mandate did not extend to the 
monitoring of funds flowing to and from private Jordanian 
corporations and banks, it did monitor flows into and out of 
the Jordanian government accounts.  He said, however, that he 
would look into the flow of Iraqi money through Jordanian 
government accounts and would pass anything of interest that 
the Bureau had on record to the delegation.  (NOTE: Following 
this exchange, one of Khazaleh,s subordinates whispered in 
Arabic that this information might be confidential.  Khazaleh 
replied that he would deal with that possibility if and when 
it arose.)  STAFFDEL raised the possibility that port fees, 
illegally charged by Saddam,s regime during sanctions but 
before the beginning of OFF, might have been paid into the 
account of a Jordanian corporation or bank.  Khazaleh 
reiterated that monitoring of private capital flows generally 
fell outside the mandate of the Audit Bureau. 
 
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JORDANIAN MINISTRY OF PLANNING 
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3. (SBU) Minister of Planning Dr. Bassem Awadallah briefed 
the delegation on the Jordanian-Iraqi trade protocol, which 
predated both the OFF program and UN sanctions on Iraq by 
several years.  He described the circumstances of the 
Iran-Iraq War, under which the program had been put into 
place, and the development in the 1980s of industries in 
Jordan whose raison d,etre was the service of the Iraqi 
market under the trade protocol.  As the Iraqi and Jordanian 
economies became even more closely linked following the 
cutoff of Saudi oil supplies to Jordan in 1990, the volume of 
trade conducted under the protocol had grown.  Awadallah 
noted, however, that the favored position of Jordanian 
industry in the Iraqi market prior to sanctions had not 
carried over into the OFF program, observing that very few 
Jordanian companies had been approved by the Iraqi government 
for participation in the program.  He attributed this 
phenomenon principally to the state of Iraqi-Jordanian 
bilateral relations, which were worsening markedly by 1996. 
 
4. (C) Jordanian companies participating in the trade 
protocol, on the other hand, had continued to export products 
into Iraq during this period of worsening relations. 
Awadallah attributed this to the relationships established 
during the previous ten years of the trade protocol by many 
Jordanian exporters with the Iraqi private companies, 
parastatals, and government bodies, who found it easier to 
simply renew contracts than to find new suppliers for the 
same goods.  Awadallah observed that while some of the 
traditional exporters to Iraq are now having trouble 
adjusting to the advent of open competition in the Iraqi 
market, the overall volume of Jordanian exports to Iraq in 
the first quarter of 2004 have been greater than the combined 
total for the year 2002.  He cautioned, however, that the 
postwar situation had brought new challenges for Jordan, and 
he asked that the delegation study the possibility of 
assisting Jordan,s efforts to control its borders. 
 
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JORDANIAN MINISTRY OF INDUSTRY AND TRADE 
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5. (C/NF) Farouk Al-Hadidi, Secretary-General of the Ministry 
of Industry and Trade, expanded further on OFF and the 
Jordanian-Iraqi trade protocol and the role of the Jordan 
Export Development and Commercial Centers Corporation 
(JEDCO), of which Hadidi had previously been chair, in both 
processes.  Very few Jordanian companies were not approved by 
the UN OIP committee to bid on OFF contracts (because of 
perceived links to the regime); those that were approved, 
however, were rarely awarded contracts by the Iraqis or had 
the funding of awarded contracts delayed by the Iraqis. 
JEDCO had acted as sponsoring agent in this process, making 
sure that the Jordanian companies applying for OFF contracts 
contained actual assets and were properly registered in 
Jordan.  It did not perform further vetting of companies 
applying for contracts.  As head of JEDCO, Hadidi had 
interacted closely with companies applying for contracts to 
export to Iraq, but he said that he had never seen a case in 
which a company holding a contract under OFF or the trade 
protocol had reported a request by the Iraqi government that 
it pay kickbacks.  This did not necessarily mean that 
Jordanians had not been asked to pay kickbacks, but Hadidi 
supposed that companies holding contracts were afraid that 
they would be blacklisted by the regime if they blew the 
whistle.  Hadidi said that it was well known, however, that 
Saddam used contracts to reward his friends and punish his 
enemies, whether on the level of individual corporations, 
sectors, or entire countries. 
 
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CENTRAL BANK OF JORDAN 
---------------------- 
 
6. (C) Faris Sharaf, Executive Director of the Banking 
Supervision Department at the Central Bank of Jordan (CBJ), 
briefed the delegation on the basic regulatory structure for 
banks in Jordan and passed to them copies of Jordan,s 
banking law.  Sharaf noted that the primary mission of the 
inspectors in the banking supervision department was to 
ensure that banks were meeting CBJ standards in areas such as 
reserve ratios and prudent allocation of loan portfolios, not 
to check accounts for links to Iraq.  He added that the 
decision to freeze assets in Jordanian accounts usually came 
from outside the CBJ, and was transmitted through the CBJ 
Vice-Governor (not present at the meeting) to the banks in 
which the accounts were located.  In answer to a question 
posed by the delegation about Jordan,s banking secrecy law, 
Sharaf explained that the law should pose no serious 
difficulties in the sharing of information between the GOJ 
and USG; it was in no way comparable in scope to the law 
governing bank secrecy in Lebanon, for instance.  In any 
case, the law could be superseded by a bilateral treaty 
between Jordan and the U.S. 
 
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UNITED NATIONS ASSISTANCE MISSION FOR IRAQ 
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7. (C) Farid Zarif, Chief of Staff of the United Nations 
Assistance Mission for Iraq (UNAMI) and Alan Feles, Political 
Affairs Officer for UNAMI, met with the delegation on May 23. 
 Zarif briefed the delegation on his personal history with 
the OFF program, which included constant involvement, in 
positions both in New York and in Iraq in directing the 
program throughout its duration.  Asked his opinion of the 
potential for future conflict in Iraq, Zarif said that while 
it was difficult to say what exactly would happen, he was not 
optimistic that the transition would be peaceful.  Zarif and 
Feles declined to respond to questions regarding abuses under 
the OFF program, saying that they would be unable to add 
anything of substance to the consultations already held 
between Congressional staff members and UN officials in New 
York and Washington.  Zarif further noted that despite 
attempts to contact the office of Paul Volcker, the director 
of the UN investigation of allegations of past OFF abuses, he 
had received no response and felt unable to speak on the 
subject of an ongoing internal UN investigation without 
specific clearance from the person leading that 
investigation.  Asked whether he had been specifically 
forbidden from speaking on the subject without clearance, 
Zarif replied that he had not. To a question by a delegation 
member about resentment within the UN towards congressional 
scrutiny of OFF abuses, Zarif replied that UN staff generally 
consider the pressure to be politically motivated and driven 
by a faction within the U.S. government rather than the 
government or society as a whole. 
 
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IRAQI POLICE TRAINING 
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8. (C/NF) Following up committee interest in Jordanian 
support of Iraqi reconstruction, the delegation met with 
Richard Pemberton and William Vigneault, consultants employed 
by INL, and Aiman Zureikat, legal representative of DynCorp, 
to discuss the ongoing construction of the Iraqi police 
training center in Muwaqqar.  The INL and DynCorp 
representatives briefed the delegation on the substantial 
strides made over the past six months in the construction of 
the center, whose essential facilities have already been 
completed with extraordinary speed during a time of 
unprecedented strain on the resources of Jordan contractors 
due to their participation in other Iraq reconstruction work. 
The representatives also noted their periodic frustration 
with the high prices in bills submitted by the Shaheen Group, 
a GOJ contractor on the same project tasked with supplying 
logistics services to the training center.  They added, 
however, that they had been given broad leeway to negotiate 
the prices in these bills down to market levels, and they 
felt they had done so successfully for all bills to date. 
 
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COMMENT 
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9. (C/NF) The Government of Jordan was generally receptive to 
meeting with STAFFDEL Scharfen at a reasonably high level and 
was quite open and cooperative in answering the delegation,s 
questions on the role of Jordanian companies in alleged 
abuses of UN sanctions on Iraq.   The apparent fact that no 
official body within the GOJ appears to have much of a role 
in tracking Iraqi assets is plausible, given the Byzantine 
nature of Saddam,s various sanctions-avoidance scams, the 
reluctance of contract-holding Jordanian companies to 
participate in whistle-blowing against the regime, and the 
likely disinterest of the GOJ in investigating very deeply 
into the contracts awarded to Jordanian companies.  The 
atmospherics of the delegation,s meeting with UNAMI staff 
were rather tense; however, this was not entirely surprising 
in view of the officials, failure to receive instructions 
from their headquarters giving guidelines on what is 
currently a very delicate subject for the UN. 
 
GNEHM