Cablegate: Goj Approaches Citigroup Re Trade Facilitation

Published: Wed 23 Jul 2003 06:47 AM
This record is a partial extract of the original cable. The full text of the original cable is not available.
E.O. 12958: N/A
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
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.
View as: DESKTOP | MOBILE © Scoop Media