US embassy cable - 03AMMAN4534

UNCLAS SECTION 01 OF 02 AMMAN 004534 
 
SIPDIS 
 
SENSITIVE 
 
OPIC FOR WILLIAMS/KIWAN 
TREASURY FOR OASIA - DEMOPULOS 
USDOC FOR 4520/ITA/MAC/ONE/PTHANOS 
 
E.O. 12958: N/A 
TAGS: EFIN, BEXP, ETRD, IZ, JO 
SUBJECT: GOJ APPROACHES CITIGROUP RE TRADE FACILITATION 
MECHANISM 
 
 
1.  (sbu)  During a July 22 courtesy call, Planning Minister 
Awadallah passed Charge a copy of a letter from the GOJ to 
Citibank Jordan GM Suhair al Ali proposing the establishment 
of a trade facilitation mechanism that would protect L/C's 
written for Jordan-Iraq commercial trade.  Awadallah said 
discussions between the GOJ and Citigroup that began on the 
margins of the Dead Sea WEF were continuing in London at 
present, and the GOJ expected a positive response to their 
proposal in the near future.  Awadallah noted that the GOJ 
had proposed using OPIC facilities as one possible mechanism 
for underwriting Iraq-related L/C's (Text of letter follows 
at end of this cable, reference to OPIC para 7 of letter.) 
 
2.  (sbu)  Al Ali subsequently told Econoff that Citigroup is 
favorably inclined to develop such a mechanism, which they 
see as benefiting both Iraq and Jordan.  She saw two possible 
options for such a mechanism.  Under the first option, CPA or 
another competent authority could create an escrow account in 
a designated Iraqi bank (including the CBI, Rafidain, or the 
newly-created Trade Bank of Iraq) which Citibank Jordan could 
use to confirm outstanding L/C's for Jordan/Iraq trade. 
Citibank would also be willing to confirm L/C's routed 
through reputable Jordanian banks using the same escrow 
account.  To do so, Citibank would need to get a feeling for 
how much exposure (in terms of open L/C's) they should expect 
at any given time for Jordan/Iraq trade.  Under the second 
option, OPIC could provide guarantees through its facilities 
to allow Citibank to confirm open L/C's related to 
Jordan-Iraq trade, including those routed through Iraqi banks 
if appropriate. 
 
3.  (sbu)  Al Ali said Citibank is currently meeting with 
Treasury officials regarding these proposals, and would 
follow up with OPIC in the near future.  She said this 
proposal would be a win-win for the region, stimulating 
bilateral trade by boosting business confidence and 
continuing to develop the long-standing traditional ties 
between Iraq and Jordan.  Such a program would have positive 
effects, she noted, in many Jordanian economic sectors - from 
banking to trade to manufacturing. 
 
4.  (sbu)  Comment:  We echo al Ali's comments as to the 
positive impact such a mechanism would create to stimulate 
trade between Jordan and Iraq.  Many private sector contacts, 
including regional visitors to Jordan, have commented that 
the only thing keeping them from entering the Iraqi economy 
is a measure of financial protection to cover their trade 
activities.  Instituting a program like that proposed by the 
GOJ could well stimulate trade and encourage private sector 
investors to pursue similar arrangements to encourage the 
flow of new investment into Iraq.  The knock-on benefits of 
such an arrangement to Jordan's financial sector, 
transportation sector, and (to a lesser extent) manufacturing 
sector could also be significant in a relatively short 
time-frame.  End comment. 
 
5.  (sbu)  Begin text of GOJ letter to Citibank Jordan: 
 
(complimentary opening) 
 
Reference is made to the meeting of His Majesty King Abdullah 
II with Mr. William Rhodes and the accompanying Citigroup 
delegation, during the meetings of the extraordinary summit 
of the World Economic Forum at the Dead Sea on 22 June, 2003, 
and to subsequent meetings that were held between the 
Minister of Planning, Dr. Bassem Awadallah, and members of 
the senior management of Citigroup. 
 
During these meetings, discussion focused on exploring 
possible means to leverage and build on the long standing 
business and economic ties that Jordan maintained with Iraq, 
in order to position Jordan as a key gateway for the 
re-construction and long term development of Iraq. 
 
Jordan's experience in economic relations with Iraq has been 
successful in all measures extending over most economic 
activities and withstanding numerous political and economic 
hurdles.  Iraq has been and continues to be one of Jordan's 
most important trade partners.  Furthermore, Iraq has been 
the biggest supplier of oil to Jordan, giving our economic 
relations a significant strategic dimension. 
 
The Aqaba Port has been over the years the main port for 
supplying goods to Iraq.  The infrastructure of the port, the 
availability of spare capacity and the high efficiency in 
moving goods equips the port to maintain its role as the main 
hub for moving goods into Iraq. 
 
The reliability of our banking sector was one of the most 
important elements in considering Jordan as a hub for doing 
business with Iraq.  This is evident by the re-export figures 
of foreign-originating goods which was around $210 million in 
2002. 
 
Jordan's future economic relations with Iraq are expected to 
grow even further.  Since the end of war activities, 
Jordanian exports to Iraq have witnessed a steady growth, 
totaling around $85 million, a testament to the strength of 
our relations and the good positioning of Jordanian goods in 
the Iraqi market. 
 
It is within this context that the Government of Jordan would 
like to seek the assistance of Citigroup in setting up a 
trade mechanism that would enable Citigroup in Jordan as well 
as a number of select fine Jordanian banks to confirm Letters 
of Credit opened by the Central Bank of Iraq and/or Rafidain 
Bank, or any other bank in Iraq nominated by the Coalition 
Provisional Authority (CPA) for the import of goods into 
Iraq.  Such a mechanism may be protected against either cash 
collateral to be held in Jordan, and/or guarantees 
established by multilateral agencies.  To facilitate this 
trade flow, it is important that we put this in place as soon 
as possible. 
 
(complimentary closing) 
 
End text. 
 
6.  (u)  Baghdad minimize considered. 
HALE