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The long arm of the embargo.

United Nations sanctions on Iraq have cost Jordan dearly. Controls on the Jordanian border have been tightened up, but that has only led to leakage elsewhere. Peter Feuilherade reports on how Jordan is paying for the Iraqi impasse.

OVER TWO AND A HALF years of international sanctions against Iraq since its invasion of Kuwait in 1990 have inflicted losses of at least $547 million on Jordan's revenues from port and cargo handling and transport, according to the Jordanian Shipping Agents Association. Its study, published at the start of 1993, said that in-transit imports, mostly destined for Iraq, passing through the port of Aqaba fell to 1.93 million tonnes in 1992 (excluding December figures), compared with 5.67 million tonnes in 1989 - a decline of 66%.

The total decline in such imports since August 1990 is estimated at 10.75 million tonnes. As each tonne of cargo passing through Aqaba accounted for 25 Jordanian dinars in revenue, this represents a loss of $400 million. The shipping agents calculate that since the United Nations imposed a trade embargo against Iraq in August 1990, another $100 million has been lost with the total halt of Iraqi exports through Aqaba, which had amounted to 1.15 million tonnes in 1989.

The balance of the estimated losses is made up of $43 million lost in 1991-92 through enforcing the cargo accessibility conditions set out by the Western countries imposing the embargo - which require that extra space be left between containers and cargo in ships' holds to make searches and inspections easier - and $4 million in rerouting charges incurred by ships which had been searched and forced to discharge cargo at other regional ports in 1992. But the shippers' figures do not take account of invisible losses suffered by Jordanian businesses as a result of delays and diversions ordered by the US-led naval patrols in the Red Sea which are enforcing the sanctions.

Although Aqaba is operating at only 60% capacity now, the ports corporation is confident that export and import traffic will pick up again, and has plans to build a multi-purpose berth there, as well as a new passenger terminal. The head of Aqaba's development programme, Ibrahim Tayyan, predicts that the port will win back the trade with Iraq once sanctions are lifted. "The sanctions will not be for ever," he was quoted recently as saying. "We are planning always to expand." Meanwhile, the European Investment Bank in January approved a loan of almost $19 million for the rehabilitation of a 71-kilometre stretch of the desert highway linking Aqaba with Amman, Jordan's main economic artery. The project is intended to clear a current bottleneck at the southern end of the highway between Ras al Naqb and Wadi Yutm, and raise the highway's capacity to 6,500 vehicles a day.

Before the Gulf crisis, some 70% of cargo passing through Aqaba was bound for or came from Iraq, Jordan's main trading partner, whose own ports in the Gulf were blocked during the 1980-88 war against Iran. Now, on top of the reduction in trade resulting from the UN embargo, Iraqi imports through Aqaba have shrunk by 90% in less than six months since Jordan began enforcing the embargo more zealously and tightening controls on supplies bound for Iraq in the middle of last year.

"Iraqi business through Jordan has dropped drastically over the last several months, and Turkey seems to be getting more of the goods and foodstuffs through to Iraq," says Tawfiq Kawar, head of the Jordanian Shipping Agents Association. In November 1992, Iraqi imports of food and medicine through Aqaba fell to 44,000 tonnes, compared with almost 570,000 tonnes in May. The number of trucks travelling between Amman and Baghdad has also dropped dramatically, from around 600 a day last April to 60 a day at the start of 1993.

Although Iraq's imports overall have fallen anyway with the declining value of the Iraqi dinar, and the government has banned luxury imports in response to its worsening foreign exchange shortage, other factors have contributed to the dramatic decline in Iraqi-bound imports through Aqaba. Among these are the executions last July in Iraq of over 40 merchants accused of profiteering and black marketeering; dozens of Iraqi companies operating out of Jordan have closed and moved to Turkey or Iran, whose ports receive less attention from the overzealous enforcers of the embargo; and a significant part of Iraq's needs are met through barter deals across the Turkish and Iranian borders, deals which are no longer possible through Jordan.

The Jordan Times quoted an Iraqi businessman as saying that despite the problems in getting goods into Iraq through Turkey and Iran, the returns were high enough to hold businessmen's interest. And Iranian and Turkish traders were happy to take Iraqi goods, mostly dates, fertiliser-related products and limited quantities of oil transported by tanker trucks, as payment, often at 40-50% less than international prices.

Freight costs from Turkey to Iraq are cheaper, with a tonne of goods from Iskenderun to Baghdad costing $12 compared to $24 a tonne from Aqaba. Turkish drivers are able to offer such low rates by buying refined petrol products cheaply in Iraq and reselling them at huge profits when they return to Turkey.

Relations between Amman and Baghdad began to cool after Jordan tightened up the enforcement of UN sanctions last year. In November, King Hussein advocated political pluralism in Iraq and the setting up of a democratic government in Baghdad to achieve what he termed "stability and trust among brothers".

The murder of an Iraqi nuclear engineer in Amman in December was blamed by Jordanian officials on Iraqi intelligence. According to Jordanian sources, Iraq sent Vice President Taha Yasin Ramadan to Amman to express Iraq's regret and a verbal message of apology from Saddam Hussein.

But at the New Year the two countries renewed an annual agreement under which Iraq will provide half of Jordan's crude oil supplies free of charge and the rest at the discounted rate of $16 a barrel. The agreement ensures that Jordan will continue to receive its daily oil requirements of 55,000 barrels from Iraq, an arrangement which has the tacit acquiescence of the UN sanctions committee because no money changes hands. Jordan's finance minister, Basil Jardaneh, told parliament that the free oil made up the bulk of Jordan's expected grants in the 1993 budget. "The budget estimated foreign grants for 1993 at 150 million dinars, including 91.6 million dinars as expected grants that Jordan will get in free oil," he said.

Although Jordan is still grappling with almost $7 billion of foreign debts accumulated four years ago, the country is enjoying a temporary upturn in the economy resulting from $3 billion in investments by more than 320,000 Jordanians who returned to the kingdom after being expelled by Kuwait and other Gulf nations in the wake of the Gulf crisis. The boost will be shortlived, however. Expatriate returnees used to contribute about two-thirds of Jordan's hard currency earnings through remittances. The country now faces the unquantifiable cost of caring for them.

The Planning Ministry says Jordan needs about $7 billion dollars to expand infrastructure and services to accommodate the steep rise in demand resulting from the returnees as well as to create job opportunities. Unemployment is conservatively estimated at 18.8% of the local workforce of 640,000.

Jordan's losses since Iraq's invasion of Kuwait in 1990 have been estimated at $3.4 billion by UN sources. The kingdom's traditional aid donors in the Gulf cut off an estimated $1.2 billion in annual aid and suspended oil supplies as a result of what they perceived as Jordan's sympathies with Iraq.

In addition, there appears to be little prospect of the Gulf states resuming their backing in the foreseeable future. Despite King Hussein's overtures to Saudi Arabia last year, Jordan was one of the first countries to criticise the Western air strikes against Iraq in January. The king said he felt "deep anger, which I believe is what is felt by Arabs throughout the Arab world, that matters have deteriorated to this point".

At the same time as attacking what he called Western double standards, the king was careful to keep open the door to better relations with President Clinton and not to appear to offer any overt support to Saddam Hussein. But a few days later, some 300 leading Jordanians urged the government to break the international embargo against Iraq and reject compliance with what they called "the resolutions of the new world order which is inimical to our Arab nation, our religion and our national interests".

A meeting of international donors in Paris at the end of January offered Amman an extra $380 million in aid for 1993, in an expression of what Jordan's planning minister, Ziyad Fariz, called "an appreciation of our role in the Middle East at large, and of our role in the peace process". However, Gulf Arab donors did not attend the meeting. Of all the region's governments actively promoting the democratic process, an international economic official at the donor's meeting commented, "Jordan has a track record of having a very strong economic team". He predicted this would help its plea to be treated as a special case, in view of its key position in future Middle East peace talks.

The $380 million pledged in Paris in January, coming on top of some $420 million in foreign loans and $220 million in grants already budgeted for 1993, completes Jordan's funding requirements for the year, according to the World Bank's director for the Middle East, Ram Chopra. But compliance with IMF terms did not mean that all domestic repercussions can be averted.

At the beginning of February, Jordan raised the price of bread for the first time in 18 years, in accordance with the IMF's plans to gradually cut subsidies and reduce the budget deficit to 5% of GNP between 1992-1998. The move could save the treasury some $7.5 million, since bread prices were subsidised by over $50 million in 1992.

The kingdom cannot depend on donors remaining generous in the future. Analysts say that Jordan's success in achieving growth and boosting the economy while following IMF guidelines could jeopardise its future aid applications. As a European diplomat told the Jordan Times, "perhaps the strongest argument Jordan has to counter an approach that it does not really need help since its economy did well in 1991 and 1992 is that the growth represented expatriate savings brought in after the Gulf crisis, and was a onetime shot in the arm."
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Title Annotation:Business and Finance; sanctions against Iraq affects Jordan
Author:Feuilherade, Peter
Publication:The Middle East
Date:Mar 1, 1993
Words:1765
Previous Article:Credibility in question.
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