US embassy cable - 02AMMAN6649

C O N F I D E N T I A L AMMAN 006649 
 
SIPDIS 
 
TREASURY FOR PIPATANAGUL 
 
E.O. 12958: DECL: 11/11/2007 
TAGS: EFIN, ETRD, ETTC, ENRG, IZ, JO 
SUBJECT: JORDAN BEGINS DISCUSSION OF 2003 OIL AND TRADE 
AGREEMENTS WITH IRAQ 
 
 
Classified By: DCM Gregory L. Berry.  Reasons 1.5 (b) and (d) 
 
1. (c)  Following internal discussion about the timing of a 
trip to Iraq by Jordanian ministers, the Jordanian trade and 
energy ministers plan to travel to Baghdad next week for 
initial discussions of the 2003 bilateral oil and trade 
protocols.  As in previous years, the two main elements of 
the negotiation are:  1) setting a reference price and amount 
of oil that Iraq will supply Jordan, and 2) agreeing on the 
value of the goods that Jordan will supply to Iraq as 
"payment" for the non-grant portion of the oil. 
 
2.  (c)  The trip follows participation by a 72 company 
Jordanian delegation in the Baghdad trade fair that was led 
by National Economy Minister Samer al-Tawil and Energy 
Minister Muhammad al-Batayneh earlier this month.  According 
to Trade Minister Salah al-Bashir, Batayneh had some informal 
discussions with Iraqi counterparts during the fair that 
"went well."  By going with a bigger technical delegation, 
al-Bashir and Batayneh hope to nail down the details. 
 
3.  (c)  Farouq al-Hadidi, the new Secretary General of the 
Ministry of Industry and Trade (Bashir's deputy) will lead 
the technical discussions of the trade protocol.  Hadidi, the 
former head of the Export Development Corporation (JEDCO), is 
new to the job and is thought by many in the local business 
community to be close to the traditional industrialists who 
export to Iraq under the protocol.  Nonetheless, we expect 
this year's agreement to follow the same general lines as 
last year. 
 
4.  (c)  The headline size of the trade protocol, however, 
will most likely be larger than last year's $250 million.  In 
part this will reflect the increase in the market price of 
oil.  In addition, the value of last year's trade protocol 
was reduced (from $450 million in 2001) to offset an 
imbalance in goods shipped over oil received that had built 
up in previous years.  Last year's agreement, negotiated by 
Samer al-Tawil when he was Secretary General, also contained 
the innovation that goods would only be shipped from Jordan 
to Iraq up to the amount of oil that Jordan actually 
received.  In addition, Jordanian and Iraqi Central Bank 
officials take advantage of the annual meetings to reconcile 
the $2 billion plus debt owed by Iraq to Jordan. 
 
5.  (c)  Comment:  Trade Minister al-Bashir told the 
Ambassador that there had been considerable discussion within 
the GOJ as to when we be the right time to make the trip to 
Baghdad.  The decision to proceed as in previous years 
represents a cold calculation by the Jordanians of their 
short-term economic interest in continuing to receive 
cut-rate oil for as long as the Iraqis provide it. 
Nonetheless, as is the case every year, we expect the Iraqis 
to seek to extract some propaganda benefit out of the visit. 
GNEHM