US embassy cable - 02AMMAN5517

C O N F I D E N T I A L AMMAN 005517 
 
SIPDIS 
 
E FOR LISA COEN, PETER CHASE 
NEA FOR DAS CHENEY 
TREASURY FOR LARRY MCDONALD 
 
E.O. 12958: DECL: 09/24/2007 
TAGS: ETTC, EFIN, PREL, IZ, JO, UNSC 
SUBJECT: IMPACT ON JORDANIAN BANKS OF OIL-FOR-FOOD TRADE 
INTERRUPTION 
 
REF: A. USUN 2351 
 
     B. AMMAN 4697 
     C. AMMAN 5240 
 
Classified By: DCM GREGORY L. BERRY.  REASONS 1.5 (B) AND (D) 
 
1.  (C)  According to the UN officials cited in ref A, 
possible military action involving Iraq would interrupt the 
functioning of the oil-for-food program.  Suppliers of O-F-F 
goods whose delivery could not be confirmed by UN officials 
in Iraq would therefore not be paid under the current rules 
governing the program.  The Jordanian Central Bank governor 
had previously described to us (ref B) the financial disarray 
this would cause for the Jordanian banking system, which at 
any one time has up to $500 million in letters of credit 
outstanding to finance O-F-F trade through Jordan.  In 
effect, Jordanian banks, not suppliers, could be left holding 
the bag if O-F-F trade were interrupted, a burden the 
governor did not think the banking system could bear. 
 
2.  (C)  The governor asked about U.S. thinking on possible 
modifications of UN rules that would reduce the risks for 
Jordanian banks.  It is likely that Jordanian officials will 
raise this problem in the high-level discussions between U.S. 
and Jordanian economic officials we expect over the next 
month.  We believe it will be useful to engage on this issue, 
which is in addition to the other economic ramifications of 
hostilities involving Iraq described in the recent Jordanian 
draft paper (ref c). 
GNEHM