US embassy cable - 03AMMAN4650

C O N F I D E N T I A L SECTION 01 OF 02 AMMAN 004650 
 
SIPDIS 
 
E.O. 12958: DECL: 07/27/2013 
TAGS: EPET, ENRG, PREL, IZ, JO 
SUBJECT: GOJ BEGINS OIL DISCUSSIONS WITH IRAQ 
 
REF: AMMAN 4535 
 
Classified By: Ambassador Edward W. Gnehm, reasons 1.5 (b,d) 
 
1.  (c)  Summary:  A working-level GOJ delegation from the 
Ministries of Energy and Finance, along with refinery 
officials, traveled to Baghdad July 24 to open discussions 
with Iraqi counterparts concerning resumption of crude 
exports from Iraq to Jordan.  The two sides held exploratory 
discussions on potential quantities, price and transportation 
methods, but did not strike any deals.  They also briefly 
discussed opportunities for new pipelines to support a 
rehabilitated Iraqi oil sector.  While the GOJ delegation was 
clearly disappointed by initial soundings from Iraq on the 
continuation of preferential oil deals, they were practical 
enough to see the need to begin planning for a new energy 
reality.  End summary. 
 
TALE OF A FATEFUL TRIP 
 
2.  (c)  A working-level delegation representing Jordan's 
Energy Ministry (MEMR), Finance Ministry (MINFIN), and the 
Jordan Petroleum Refinery Company (JPRC) traveled to Baghdad 
July 24 to open discussions with Iraqi counterparts on the 
resumption of crude oil imports.  The delegation was led by 
MEMR Secretary General Khaldoun Qteishat and JPRC General 
Manager Azmi Khreisat.  Econoff and Poloff accompanied the 
six-member delegation, which flew a Royal Wings charter into 
Baghdad International Airport (BIAP) and was met and escorted 
throughout the day by CPA Oil Ministry advisors and mil 
escorts.  The trip represented the first direct post-war 
contact between GOJ line ministries and Iraqi counterparts, 
and engendered some jealousy from other ministries that did 
not participate (notably Planning and Industry/Trade). 
 
QUANTITIES 
 
3.  (c)  The GOJ delegation held a private two-hour meeting 
with Iraq's Oil Minister and the SOMO chief, after which MEMR 
SecGen Qteishat back-briefed Econoff on the substance of the 
talks.  Qteishat cautioned that this discussion was only 
probative, and that the real success was that contact had 
been made and the two sides had agreed to continue 
discussions, and to meet again in November/December. 
Qteishat said the GOJ approached the GOI to begin supplying 
crude in quantities of 50,000 bpd, to compensate for oil and 
cash equivalents promised but not delivered by Kuwait and the 
UAE.  He said Iraqi Oil Minister Ghadban reported that all 
Iraqi crude exports were already contracted to other 
(unspecified) buyers, but that a small quantity such as that 
requested by the GOJ could probably be accommodated. 
 
PRICING 
 
4.  (c)  Qteishat noted with some disappointment that Ghadban 
was only prepared at the moment to offer exports at market 
rates - a far cry from the $600 million-plus subsidy Jordan 
enjoyed from Iraq under Saddam Hussein.  Qteishat said, 
though, that there should be some room for negotiation on the 
pricing, and that he hoped to be able to secure more 
concessionary rates from Iraq after further negotiation. 
 
TRANSPORTATION OPTIONS 
 
5. (c)  The two sides also discussed transportation 
mechanisms.  Noting that the preferred method would be 
overland shipments - both for cost-savings and to relieve 
pressure on Aqaba port - the GOJ and GOI recognized that such 
an arrangement would not be possible until the security 
situation on the Amman-Baghdad highway improved 
significantly.  In addition, Ghadban said Iraq's fleet of 
crude trucks was dilapidated, and was damaged somewhat in the 
war.  As a result, overhauls and new equipment purchase would 
be necessary before overland shipments could restart in 
significant quantity. 
 
PIPE DREAMS AND OTHER THINGS 
 
6.  (c)  Qteishat said the two sides also briefly discussed 
reinvigorating plans for oil sector infrastructure programs 
that were interrupted by the war or by UN sanctions.  He 
noted that MEMR was considering re-issuing an RFP for a 
pipeline from the border to the Zarqa refinery, but said that 
such a project would now most likely be considered as part of 
a more ambitious scheme to make Jordan an alternate oil 
exporting port for Iraq.  The more ambitious scheme, 
originally researched by the U.N. (according to Qteishat) in 
the mid-1980's, envisioned running pipelines from Iraqi oil 
fields to Zarqa and to Aqaba, and building an additional oil 
refinery in Aqaba to process the crude.  An even larger 
version proposed continuing the Zarqa line to Haifa (note: 
this is NOT/NOT the pipeline routinely mentioned in the press 
- that line was built in the 1930's and has long since 
disappeared.  End note).  Both sides admitted, though, that 
any such scheme was years in the future. 
7.  (c)  CPA advisors told Emboffs in a separate meeting that 
gasoline deliveries to Iraq from Jordan continued and were 
extremely well-received.  They hoped Iraq to be 
self-sufficient in gasoline production sometime in September, 
at which time the need for such imports would cease.  LPG, 
though, continued to be a problem, with self-sufficiency not 
likely until at least the end of the year.  They said there 
would be a continued need to use Aqaba as a through-put point 
for LPG deliveries, but recognized limitations to Aqaba's 
off-loading and storage capacity for such product. 
 
COMMENT 
 
8.  (c)  The Jordanian delegation was (pleasantly) surprised 
by the hands-off attitude CPA took with respect to these 
discussions.  As one CPA advisor told Emboffs, they see 
themselves essentially as facilitators to get the Ministries 
back up and talking to their usual contacts.  They professed 
no wish to participate in any substantive talks, preferring 
to let the Oil Ministry "cut its own deals."  This meeting 
made clear that, in some instances at least, Iraqis are 
already back in charge of their own resources and their own 
decision making on operational issues.  The GOJ delegation 
noted some disappointment that the relative "normalcy" of 
such a bilateral meeting would go largely unnoticed by the 
press.  They were also disappointed, but not surprised, that 
the concessional deals of the Saddam years had been laid to 
rest.  The GOJ is now planning for more challenging 
negotiations with Iraq over oil futures.  End comment. 
 
BAGHDAD IMPRESSIONS 
 
9.  (c)  Cell phones:  Econoff's Fastlink cellphone received 
incoming international calls in some locations, but not in 
others.  Outgoing calls were not possible.  In addition, at 
least some of the fixed-line phones at the Oil Ministry were 
in active service.  CPA reps noted that the Oil Ministry's 
infrastructure was relatively undamaged by combat operations 
and spared the degree of looting suffered by some other 
Ministries. 
 
10.  (c)  Coordination needs:  Despite numerous conversations 
between Embassy staff, Amman HACC team, and CPA staff, this 
visit came as something of a surprise to CPA.  CPA should be 
commended for the excellent support provided, both logistical 
and hospitality, which were positively noted by the GOJ 
delegation as well.  CPA clearly faces a resource crunch, 
which we believe will only become more acute as the number of 
visitors increases - as just one example, we witnessed 
extremely high demand for very limited motorpool resources at 
the Oil Ministry, which forced some CPA officials and mil 
liaisons to change their schedules to accommodate us.  We 
greatly appreciate their flexibility. 
 
11.  (c)  One CPA officer noted that the presence of a 
full-time travel/visit liaison from State or another agency 
would greatly assist them in planning and executing visits 
from USG personnel, third country diplomats, and private 
sector entities.  He said there should be no problem finding 
physical space for such a coordination office, which he saw 
as being increasingly necessary as ministries come on line, 
USG visits increase, and the private sector begins to lose 
its timidity regarding trips to Iraq.  Finally, another 
senior CPA officer noted a severe shortage of charter flight 
seats available to outgoing CPA travelers and to incoming USG 
travelers, as reported reftel.  He said CPA would welcome any 
arrangement to increase the availability of chartered seats 
for USG travelers. 
HALE