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March 21, 2005

Analysis: Iraq-Jordan Dispute Portends Economic Problems For Amman

by Kathleen Ridolfo

Iraqis in Baghdad protest against Jordan

Tensions between Iraq and Jordan have spiraled to an unprecedented low two weeks after the Jordanian daily "Al-Ghadd" printed an apparently fabricated report claiming that a Jordanian father celebrated his son's martyrdom in a suicide operation in Iraq (see "RFE/RL Iraq Report," 21 March 2005).
Both countries also recalled their ambassadors on 20 March, as Iraqi leaders accused Jordan of harboring Iraqi Ba'athists and contributing to terrorism in Iraq through lax security and a lenient attitude towards the media in the country. Iraqi Shi'ite parliamentarian Akram al-Hakim told Al-Jazeera television on 20 March: "The deterioration is a natural consequence of a huge file of violations not only by the Jordanian government but also by political, popular, and media circles in Jordan." Continuing tensions between the two countries could cause severe problems for Jordan, not only diplomatically, but on the economic level as well.


Jordan has benefited from the war and the reconstruction phase in Iraq more than any other country in the region. Jordan reportedly aided coalition forces during the war by providing a base of operations for the U.S. military along Iraq's western border. It has since served a vital role as Iraq's reconstruction hub, facilitating the delivery of military goods, equipment, and reconstruction supplies, as well as serving as a safe area for various programs supported by the U.S. and Iraqi governments and other international institutions where Iraqis -- from journalists to soldiers -- could be trained away from the insecurity and chaos of Baghdad. For Jordanian businesses, the reconstruction phase has been a boon for the floundering economy, which was affected by slow economic progress and the ongoing Palestinian "intifada."

A recent International Monetary Fund (IMF) report (http://www.imf.org/external/pubs/ft/scr/2005/cr05100.pdf) predicted that macroeconomic conditions for Jordan remained manageable in 2005 due to, among other factors, "the emergence of Jordan as a hub for activities in Iraq." The report cited a "remarkably strong and broad-based rebound in exports to Iraq," noting "merchandise export growth is expected to be sustained at about 6-8 percent a year, spurred by further penetration of markets in Iraq and other neighboring countries, as well as by the [free-trade agreement] with the United States and the Association Agreement with the European Union." The "Jordan Times" reported on 20 March that Iraq is second to the U.S. as Jordan's top commercial partner, accounting for 16 percent -- or $42.4 million worth -- of exports from Jordan. In April, Jordan will host the Second International Trade Exhibition for the Rebuilding of Iraq, linking Iraqi government officials and businessmen to outside investors. Some 900 companies from 43 countries are expected to take part in the trade fair, with tens of billions of dollars in contracts at stake.

The situation between Iraq and Jordan escalated in recent days after Iraqis, led by Supreme Council for the Islamic Revolution in Iraq (SCIRI) head Abd al-Aziz al-Hakim, leveled the aforementioned accusations against the Jordanian government. Al-Hakim praised demonstrators who had protested for several days across the Babil Governorate where the Al-Hillah bombing took place, and in Baghdad where some 2,000 demonstrators gathered on 18 March (see "RFE/RL Newsline," 21 March 2005). Al-Hakim and others condemned Jordan's initial failure to respond adequately to the "Al-Ghadd" report, when the government, rather than addressing the newspaper's report, condemned SCIRI for criticizing the Jordanian government.

It appears that the Jordanian government did contribute to the deterioration in relations by failing to assess the Iraqi people's reaction and increasingly vocal intolerance of the continued terrorism taking place on the ground in their country. Instead, Jordan portrayed SCIRI's reaction as overblown, a likely response in light of an earlier dispute that erupted in December, when the king reportedly accused Tehran of seeking to establish a Shi'a belt from Iran to Lebanon through Iraq, an accusation that offended Iraqi Shi'ite leaders. Abdullah later retracted his statement in an interview with Amman's "Al-Ra'y" published on 6 January (see "RFE/RL Newsline," 7 January 2005), saying his comments were misinterpreted. Jordanian Foreign Minister Hani al-Mulqi, however, perpetuated the Jordanian viewpoint on 21 March, when he told Al-Arabiyah television that he believed Iran to be behind the current crisis.

The Jordanian Senate, meanwhile, said in a 21 March communique that there is no critical issue between the two countries or the two peoples, adding that a 'stray group' has exploited a false news report in order to hamper Jordanian-Iraqi relations, Petra reported. Senators called the SCIRI statements a "fake and unfair" campaign against Jordan, the news agency said. Jordanian media also portrayed the SCIRI statement in a negative light.

Jordan did issue an official response to SCIRI on 20 March, saying: "We have cooperated and still cooperate with the Iraqi brothers through our national institutions to destroy this plague which does not distinguish between Jordanians and Iraqis, Shi'ites and Sunnis, and which aims to sow the seeds of sedition between the two fraternal peoples." Some Iraqi officials however, are apparently holding out for an official apology from King Abdullah.

The crisis could critically affect Jordan's role vis-a-vis Iraq's reconstruction in the coming months as Shi'ites assume control over the transitional government. Iraq and Jordan are currently in the final stages of several economic agreements, including the establishment of a free-trade zone on their border. Last week, Jordan and Egypt reached an initial agreement with Iraq to provide electricity to Iraq's western Al-Anbar Governorate. Iraqi-Jordanian business is so important that the Jordanian government in February instituted a number of measures, including the granting of temporary Jordanian citizenship to some Iraqi businessmen in order to facilitate business development. The measure also means Iraqi businessmen would not have to provide credit guarantees to Jordanian national banks for loan transactions.
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