US embassy cable - 03AMMAN1704

UNCLAS AMMAN 001704 
 
SIPDIS 
 
E FOR U/S LARSON, SECOR 
TREASURY FOR OASIA--MILLS/CHANG 
USDOC 4520/ITA/MAC/ONE/COBERG 
 
E.O. 12958: N/A 
TAGS: EFIN, ETTC, ECON, JO 
SUBJECT: TFIZ01: JORDANIAN MARKETS REACT CALMLY TO START OF 
HOSTILITIES 
 
Sensitive but Unclassified. 
 
1.  (sbu)  We have been in touch with the finance ministry, 
central bank, and local bankers, and have reported in our 
sitreps and other messages that Jordanian financial markets 
have been calm, with no exceptional demand for dollars or 
withdrawal of deposits.  There has been no pressure on 
foreign exchange reserves. 
 
2.  (sbu)  The stock market index closed up 1.25% on Thursday 
(closed on Friday, Saturday).  The biggest gainers were 
industrial companies that might participate in Iraq 
reconstruction and more liberal trade with Iraq.  Banks have 
lots of cash dollars on hand to meet any extraordinary demand 
for banknotes, and have had no problems with correspondent 
banks outside the region. 
 
3.  (sbu)  In addition, the central bank has ordered 
commercial banks to freeze deposits of the Iraqi government 
and known fronts and to monitor all other Iraqi accounts for 
suspicious movements. 
 
4.  (sbu)  The oil flow from Iraq has stopped, and there 
appears to have been a smooth shift to use of stocks in Aqaba 
and Zarqa.  Along with the common understanding that the Gulf 
countries will provide concessional oil, this has been 
reassuring.  (FM Muasher told the Ambassador March 21 that he 
had been in touch with the Saudis, UAE, and Kuwaitis to nail 
down the final logistical and financial details.)  Markets 
are also reassured by the high level ($3.5 billion) of 
official foreign exchange reserves. 
 
5.  (sbu)  QIZ exports have been able to continue as the 
Israeli border remains open for shipments via Haifa and Aqaba 
port remains open.  Non-regional carriers have sharply 
curtailed air service, but the airport remains open and Royal 
Jordanian is trying to fly as many of its regular flights as 
possible, including direct service to the United States. 
 
6.  (sbu)  Swift action on the OFF readjustments to allow the 
UN to certify delivery of OFF goods in Jordan rather than in 
Iraq would also help minimize the impact of the conflict on 
those banks involved in OFF trade. 
 
7.  (sbu)  On Sunday, the Ambassador and Finance Minister 
will the bilateral debt rescheduling agreement.  This will 
give the Ambassador an excellent platform to highlight US 
assistance to Jordan and the investment the US has made in 
the bilateral economic relationship.  This should provide 
another element of reassurance for economic actors, who 
generally expect the US to provide extraordinary assistance 
to help Jordan weather the initial impact of a conflict. 
GNEHM