Jordan May Have Helped Iraq Pass Funds Around International Freeze

ONE key element of the international embargo against Iraq has been a freeze on that country's assets worldwide. US officials and Arab banking sources say that Iraq may have been able to circumvent that embargo with Jordan's help. Sources say Iraqi authorities enlisted Amman's help to maneuver Iraqi money safely through the international freeze. If these attempts were successful, sources speculate that Jordan may have helped Iraq secure access to hundreds of millions of dollars.

The US Treasury's Office of Foreign Asset Control (OFAC) has unveiled Jordan's role while examining Iraq's financial and procurement networks used to fund and equip Iraqi President Saddam Hussein's war machine.

During a visit to Washington this week, Michel Marto, Jordan's deputy central bank governor, vehemently denied the allegation implicating Jordan. While the Iraqis did ask to transfer their funds, ``most were not successful,'' he said, adding ``these requests were made before the assets were frozen.''

Mr. Marto insisted that prior to Aug. 2, Iraq regularly transferred funds into Jordan's Central Bank accounts as part of monthly scheduled payments on Iraqi debt. Marto says Baghdad owes some $300 million to Jordan, paid in increments of $12 million to $15 million a month.

OFAC investigators have reportedly found foreign bank telexes, dated after Aug. 2, detailing Iraqi requests to transfer tens of millions of dollars into Jordanian accounts in single transactions.

A lawyer familiar with the OFAC investigation says that given Iraq's self-proclaimed financial duress and its costly invasion of Kuwait, ``it's hard to imagine it was paying anyone back.''

On the contrary, Iraq madeevery attempt to build up its limited financial reserves, he says.

For example, when international companies tried to retrieve their employees caught in Iraq during the early weeks of the Gulf crisis, he says, they found that ``Iraq was selling bodies - that is, anyone securing an employee's release had to make payments to Jordanian banks that would eventually pay off Iraqi authorities in exchange for the hostages.''

The lawyer says that Jordan's attempt to secure Iraqi finances runs counter to Amman's neutral stance in the days following Iraq's Aug. 2 invasion of Kuwait.

He says that OFAC has uncovered information from international banking sources in Europe and the Middle East that shows Jordan was a willing participant in an operation to hide Iraqi assets.

This operation began on Aug. 3, when notification was received by the Arab Bank, Plc in London, that the British-based Midland Bank would be transferring $16 million from the Rafidain Bank account at Midland to the Central Bank of Jordan's account at the Arab Bank.

In a similar situation, Rafidain Bank on Aug. 5 instructed ALUBAF Arab International Bank in Bahrain to convert $75 million in Iraqi deposits into Swiss francs - thereby depleting the account - for transfer into the Jordanian Central Bank's account at the Union Bank of Switzerland in Zurich.

The lawyer points out that while these particular transactions might have been aborted by bank authorities, the intended net result was money transferred from Iraqi accounts into Jordan's Central Bank accounts outside of Jordan to which Iraq had access.

This, he says, was designed to provide Iraq with liquid assets which would not have been available if sanctions were observed.

A knowledgeable source says Jordan knew of the tranfer scheme just days after the invasion, while King Hussein publicly maintained a neutral stand.

Bahrain, a major offshore banking center, has been the clearinghouse for many such attempted transactions.

``We have been receiving a lot of communications from banks who have received instructions from clients and banks'' to release Iraqi deposits in Bahrain, says Abdul Rahman Alwuazzan, executive director for foreign-banking control at the Bahrain Monetary Agency (roughly the equivalent of the US Federal Reserve), in a telephone interview. ``We've urged banks to identify the beneficiary and abide by the spirit and content of the international sanctions against Iraq.''

While he would not confirm knowledge of the Aug. 5 telex requesting the Iraqi financial transfer, when asked about knowledge of similar requests Mr. Alwuazzan said, ``If I'd say no to you, I'd be lying.''

On Aug. 2, Jordan took the lead in advocating an Arab solution to Iraq's invasion of Kuwait and promoted itself as the appropriate mediator.

That same day, the US government froze Iraqi and Kuwaiti assets in the US.

Britain froze Kuwaiti assets, while France froze both Kuwaiti and Iraqi assets. Switzerland, host to myraid foreign bank accounts, ordered ``strict vigilance'' over Kuwaiti holdings in that country because authorities saw the danger of international abuses of the freeze within their own banking system.

Of the 21 Arab League members who met in Cairo on Aug. 3, Jordan was one of five countries to abstain from condemning Iraq's invasion or Kuwait. A day later, King Hussein called the condemnation of Iraq's invasion ``premature.''

The 12-nation European Community, including Britain, froze Iraqi assets in their respective countries on Aug. 3. One week later, on Aug. 10, Jordan agreed to observe the sweeping UN trade and economic boycott of Iraq, imposed on Aug. 6. By then, Iraqi efforts to secure finances through Jordan are said to have been already under way.