Cablegate: Jordan: Trading with Iraq

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS AMMAN 002562

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: ETRD ECON JO IZ
SUBJECT: JORDAN: TRADING WITH IRAQ

REF: A. SECSTATE 104141
B. AMMAN 2068
C. AMMAN 1651

Sensitive but unclassified.

1. (sbu) The following responses to the questions asked ref
A are based on our ongoing dialogue with Jordanian officials
and business leaders on their business and trade
relationships with Iraq. Refs B and C are recent reports on
these issues.

2. (sbu) Jordan was not one of the countries that concluded
a "free trade agreement" with Iraq in recent years. However,
according to the Ministry of Trade, Jordan and Iraq have a
bilateral trade agreement dating from the 1980's that exempts
all, or nearly all, trade in goods from duties and tariffs.
Since the start of UN sanctions, however, Iraq has applied an
ad valorum tax of approximately 20% to all imports from
Jordan and other countries. The proceeds of this "war tax"
were purportedly used to compensate the Iraqi people for the
cost of sanctions. The Ministry hopes that, with the change
in the Iraqi government, the liberal provisions of the
earlier agreement will apply to Jordanian exports.

3. (sbu) The bulk of Jordan's trade with Iraq since 1991
was with the Iraqi government under the UN Oil for Food
program and the Jordan-Iraq bilateral oil for goods barter
protocol, under which Iraq supplied Jordan with deeply
discounted oil, with Jordan paying for the non-discounted
portion by shipping Jordanian products. Exchanges under the
protocol stopped when hostilities began in March. According
to the Amman Chamber of Industry, about 5% of Jordan's total
exports to Iraq were purchased by private Iraqi companies.
Annual statistics on Jordanian exports to Iraq are available
on the Central Bank of Jordan and Department of Statistics
websites.

4. (sbu) The Jordanian government and business community
are hopeful that they will be able to re-establish and build
upon Jordan's close traditional trading and business
relationship with Iraq. Jordanian businesses and companies
have longstanding contacts in the Iraqi government and
private sector, as well as family and personal relationships
with Iraqis. In addition, private Iraqis have invested in
manufacturing facilities in Jordan that were used to supply
the Iraqi market under the OFF and barter protocol programs.
Jordanian companies and the government also hope that the
seaport in Aqaba and international airport in Amman will
serve as major logistical hubs for provisioning the Iraqi
economy.

5. (sbu) The Chamber of Industry and the government
recognize that many Jordanian businesses that exported to
Iraq under the bilateral barter protocol will not be
competitive in a market environment. They expect, however,
that other Jordanian industries and companies will be able to
compete successfully, as they currently do in other regional
markets, including GCC countries and Egypt.

6. (sbu) Jordanian businesspeople believe that Iraqi
companies and government agencies will require extensive
assistance in order to resume exporting. For example, an
Amman-based grain trader who has had long experience selling
to Iraq told us that his Iraqi counterparts were telling him
that all of the records of the "Foodstuffs Authority," the
Iraqi agency responsible for grain procurement, had been
destroyed. The remaining officials do not even have points
of contact with foreign suppliers. The Jordanian business
community believes that it is well-placed to assist its Iraqi
private sector counterparts develop their capabilities. The
American Chamber of Commerce in Jordan, for example, has
discussed its interest in helping establish a counterpart
AmCham organization in Iraq.
GNEHM

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