US embassy cable - 04AMMAN5726

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. 
 
--------------------------------------------- -- 
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