US embassy cable - 02AMMAN6722

C O N F I D E N T I A L SECTION 01 OF 02 AMMAN 006722 
 
SIPDIS 
 
TREASURY FOR DAVID LOEVINGER/LARRY MCDONALD 
 
E.O. 12958: DECL: 11/13/2007 
TAGS: EFIN, EAID, JO 
SUBJECT: JORDAN: DAS SATTERFIELD DISCUSSES PROPOSED 
ASSISTANCE PACKAGE 
 
 
Classified By: AMBASSADOR EDWARD W. GNEHM, JR.  REASONS 1.5 (B) AND (D) 
. 
 
1.  (c) Summary.  In meetings with the Jordanian Prime 
Minister and Finance Minister, DAS Satterfield was told that 
answers to the U.S. questions regarding possible supplemental 
economic assistance for Jordan would be ready within the 
coming week.  The ministers agreed that additional U.S. 
assistance could be structured so as to address the basic 
objective of weaning Jordan off its economic dependence on 
the Iraqi oil grant within the framework of its existing IMF 
supported economic program.  While there is a need for 
further discussion of the details of such a transition, both 
the Prime Minister and the Finance Minister accepted the need 
for economic conditionality that supported this objective. 
Both sides acknowledged the need to foster support in the 
U.S. Congress.  The Prime Minister said there had been no 
movement on a proposed Kuwaiti-Saudi-UAE oil package and 
asked for continued U.S. involvement.  The finance minister 
briefed on the positive economic performance so far this 
year.  End Summary. 
 
2.  (c)  DAS Satterfield met separately with Finance Minister 
Michel Marto and Prime Minister Abul Ragheb on November 13 to 
follow-up on the November 1 Jordanian-U.S. discussions in 
Washington of a supplemental assistance package for Jordan. 
Foreign Minister Marwan Muasher joined Abul Ragheb. 
Ambassador Gnehm, Treasury Deputy Office Director Marshall 
Mills, and Econ/c Goldberger accompanied Satterfield. 
 
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Follow-up Questions 
------------------- 
 
3.  (c)  Abul Ragheb explained that the Jordanian government 
had been working on answers to the five follow-up questions 
that emerged from the Washington meetings.  He said that this 
work was not yet finished, mainly because of uncertainty over 
the intent of the fourth question relating to social spending 
programs.  Satterfield explained that the question was 
looking for reassurance that Jordan would use additional 
resources made available by the United States within its 
existing budgetary structures and targets agreed with the 
IMF.  Additional resources should compensate for revenue 
losses (and perhaps exceptional spending needs) associated 
with the dissolution of Jordan's special economic 
relationship with Iraq.  The goal or philosophy behind 
extraordinary assistance would be to facilitate the creation 
of an independent Jordanian economic system that is 
sustainable over the long term, Satterfield said.  As part of 
this, Satterfield stressed the need to establish market 
pricing for petroleum products. 
 
4.  (c)  Both Abul Ragheb and Marto agreed with these 
objectives.  They understood that current fiscal dependence 
on the Iraqi oil grant was not sustainable.  They agreed it 
was necessary to have a plan for making a transition to 
petroleum product prices set by market forces.  They also 
accepted the need for the U.S. to put economic conditions on 
the use of assistance.  Marto in fact welcomed such 
conditionality as giving him additional leverage to promote 
reforms.  Abul Ragheb's comments suggested, however, a need 
for further discussions about the details and timing of a 
transition to market prices.  He said, for example, that oil 
produce prices could be raised in annual increments of 7% per 
year for five years (which doesn't add up).  (Comment: the 
visiting IMF team told Mills and Goldberger earlier in the 
day that they thought a 50-60% increase in average product 
prices needed to meet world prices could be achieved over two 
to three years.)  Abul Ragheb noted that the Administration 
was considering a multi-year ESF package.  He pointed out 
that the most significant economic consequences of any 
confrontation with Iraq would occur during the first year. 
He argued for maximum disbursals early on. 
 
5.  (c)  Abul Ragheb appreciated the guidance from 
Satterfield and said the he would work to have the answers 
ready by early in the week of November 19.  Abul Ragheb asked 
wither additional assistance would be provided even if there 
were no conflict in Iraq.  Satterfield responded that that it 
was unclear, but that Congressional support would be more 
problematic if there were no conflict.  Mills also said he 
would be available for any further technical discussions. 
 
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Iraq Debt 
--------- 
 
6.  (c)  Abul Ragheb also raised the possibility of 
supplementing U.S. assistance with repayments of what he said 
was the $1.4 billion in old debt owed by Iraq to Jordan.  He 
suggested that if this debt were repaid over five years it 
could help cushion the fiscal impact of having to buy oil at 
market prices.  Satterfield said he would transmit this to 
Washington, but noted that other creditors also had 
significant claims on Iraq. 
 
----------- 
Oil Package 
----------- 
 
7.  (c)  Abul Ragheb also confirmed that there had been no 
new developments regarding the special oil supply package 
suggested by Kuwaiti State Minister Muhammad al-Sabah.  He 
expected that such a package would include concessional 
elements.   King Abdullah had not specifically raised the 
question with Crown Prince Abdullah in Riyadh the day before 
(November 12), although he did receive general assurances of 
Saudi support for Jordanian "brothers." 
 
-------------------- 
Economic Performance 
-------------------- 
 
8.  (sbu)  Marto briefed on the outcome of the just completed 
IMF mission.  He said that the Fund thought the 2002 annual 
real GDP growth target of 5.1% was attainable and that 2003 
growth could reach 6%.  Improved performance was based mainly 
on strong export growth, tourism receipts, and remittances. 
(Tourism receipts were 11% more in the first nine months of 
2002 than the same 2001 period, as greater tourism from Arab 
countries more than compensated for a lower number of 
European and U.S. visitors.)  Internal demand, however, 
remained weak.  Marto expected that all of the stand-by 
program's year-end performance criteria would be met, despite 
lower than expected fiscal receipts.  He noted that this had 
been achieved despite the uncertainties in the political 
environment and appreciated U.S. economic support, 
particularly for the Program for Social and Economic 
Transformation (PSET).  He said the government was continuing 
to make progress on its structural reform goals, particularly 
those connected with pension reform. 
 
9.  (c)  Satterfield and Mills cleared this message. 
GNEHM