VZCZCXRO3070
PP RUEHLMC
DE RUEHAM #1472/01 1820428
ZNY CCCCC ZZH
P 010428Z JUL 09
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC PRIORITY 5408
INFO RUEHTH/AMEMBASSY ATHENS PRIORITY 0008
RUEHEG/AMEMBASSY CAIRO PRIORITY 4056
RUEHDM/AMEMBASSY DAMASCUS PRIORITY 4194
RUEHFR/AMEMBASSY PARIS PRIORITY 1576
RUEHRH/AMEMBASSY RIYADH PRIORITY 2176
RUEHRO/AMEMBASSY ROME PRIORITY 1618
RUEHUL/AMEMBASSY SEOUL PRIORITY 0076
RUEHSM/AMEMBASSY STOCKHOLM PRIORITY 0077
RUEHTV/AMEMBASSY TEL AVIV PRIORITY 1777
RUEHKO/AMEMBASSY TOKYO PRIORITY 0297
RUEHJM/AMCONSUL JERUSALEM PRIORITY 5564
RUEHLMC/MILLENNIUM CHALLENGE CORP PRIORITY

C O N F I D E N T I A L SECTION 01 OF 03 AMMAN 001472 
 
NOFORN 
SIPDIS 
 
STATE FOR NEA/ELA, NEA/RA, AND OES 
STATE PASS TO USAID 
STATE PASS TO OPIC 
STATE PASS TO USTDA 
 
E.O. 12958: DECL: 07/01/2019 
TAGS: SENV EAGR EAID ENRG PGOV PREL KNNP JO IS
SUBJECT: GOJ SEEKS USG SUPPORT FOR JORDAN-ONLY RED SEA 
DEVELOPMENT PROJECT 
 
REF: A. A. AMMAN 1219 
     ¶B. B. AMMAN 1116 
     ¶C. C. AMMAN 1027 
     ¶D. D. AMMAN 860 
     ¶E. E. AMMAN 508 
 
Classified By: Ambassador R. Stephen Beecroft for reasons 1.4 (b) and ( 
d) 
 
¶1.  (C/NF) SUMMARY: Despite the ongoing multilateral World 
Bank led Red Sea - Dead Sea Feasibility study (RDS), on May 
17 Jordan announced a unilateral $10 billion Jordan Red Sea 
Development Project (JRSP). The GOJ sees a Red Sea - Dead Sea 
conveyance mechanism as the best way forward to solve its 
water woes, but frustrated by the World Bank's slow pace has 
engaged the U.S. engineering firm Montgomery Watson Harza 
(MWH) to plan the Jordan-only JRSP.  Phase 1 of the JRSP 
projects the start of water delivery by 2014 at a price-tag 
of $2.5 billion.  Although the JRSP is to be private sector 
financed, the GOJ and MWH are trying to rally USG support for 
the JRSP (noting that a USG vote of confidence will spur 
private sector investment) and also seeking USG financing 
from MCC, OPIC, USAID, EXIM Bank, and other potential 
channels.  The USG position to date has been that we need to 
await the results of the World Bank RDS prior to taking a 
position on the merits of any proposed implementation.  Post 
believes we should maintain that stance despite the likely 
increased pressure from the GOJ.  END SUMMARY. 
 
Jordan Decides to Go It Alone on Red-Dead Project 
--------------------------------------------- ---- 
 
¶2.  (SBU) The ongoing multilateral World Bank led Red Sea - 
Dead Sea Feasibility study (RDS) includes Jordanian, Israeli 
and Palestinian participation (ref B).  Despite this 
multilateral framework, on May 17 Jordan announced a 
unilateral $10 billion Jordan Red Sea Development Project 
(JRSP) to convey water from the Red Sea to the Dead Sea, 
generate hydropower, operate a desalination plant, and 
provide potable water for Jordan (and potentially for Israel 
and the Palestinian Authority, according to Jordan).  The 
lead vendor for this project, MWH, has proposed an initial 
$2.5 billion Phase 1 to be completed by 2014.  Phase 1 would 
also send 50 MCM of desalinated water to Amman by 2014 using 
the Disi pipeline (ref C) with a longer term goal of 
supplying 80 MCM of fresh water to Jordan's proposed first 
nuclear reactor in Aqaba (estimated for 2017-2020).  (Note: 
The Disi water conveyance proposes to convey 100 MCM of water 
from the Disi fossil aquifer on the Jordanian-Saudi Arabia 
border to Amman.  The project is partially financed by OPIC. 
End Note.) 
 
¶3.  (C/NF) The JRSP project is intended to create a synergy 
between Jordan's energy and water needs and potential 
solutions - but with currently unknown consequences. 
Jordan's ambitious nuclear energy plans could require up to 
350 MCM of fresh water for cooling.  The JRSP in turn has a 
725 MW energy deficit for pumping water to Amman.  Based on 
the King's direction, the water and nuclear energy 
constituencies are partnering to support each other through 
the JRSP.  The JRSP vision also includes plans for three new 
cities (near Amman, Dead Sea, and Aqaba) of 1.2 million total 
residents and the establishment of new industries to build 
steel pipes, desalination membranes, and provide chlorine to 
supply the JRSP as well as the region.  MWH stresses that the 
developmental aspects of the JRSP result in viable financial 
models and boost the economic development rationale for the 
JRSP. 
 
¶4. (C/NF) The water conveyance elements of the JRSP are 
similar to the World Bank-led RDS plan to which the USG has 
contributed $1.5 million.  For example, both projects are 
predicated on conveying water from the Red Sea to the Dead 
Sea, generating hydropower, desalinating water for Jordan, 
 
AMMAN 00001472  002 OF 003 
 
 
and resuscitating the Dead Sea water levels with brine from 
the desalination plants.  To date, the USG has maintained 
that we need to see the results of the World Bank RDS before 
we can take a position on the possible merits of any Red Sea 
- Dead Sea project.  Post has reevaluated this position and 
recommends it be maintained, despite the JRSP announcement. 
 
MWH Pitches the Project to USG 
------------------------------ 
 
¶5.  (C/NF) MWH representatives, accompanied by Ministry of 
Water and Irrigation Secretary General Maysoon Zubi and 
Chairman of the Jordan Atomic Energy Commission Dr. Khaled 
Toukan, provided a JRSP briefing for Post on June 21.  MWH 
stressed that USG support for the JRSP is important for the 
project's success, and would also provide a strong boost to 
help raise private financing.  (Note:  MWH noted the Embassy 
briefing was similar to that provided recently to the 
Department.  MWH also claimed it expected to provide a 
briefing to Secretary Clinton in the future.  End Note.) 
MWH, supported by the GOJ, has portrayed the JRSP as critical 
to Jordan's future water and energy needs which are tied to 
its economic development and social stability - and hence 
inherently worthy of USG political and financial support. 
 
¶6. (C/NF) MWH has requested the following possible forms of 
USG support: 
- USG interagency coordination of efforts to support Jordan's 
National Water Strategy and the JRSP; 
- Designation of a source such as the MCC, USAID, or U.S. TDA 
to provide a grant to help design JRSP Phase 1; 
- Recruitment of support from bilateral and multilateral 
banks for JRSP including OPIC and EXIM Bank; 
- Consideration of ways for the USG to buy some of the water 
produced from JRSP for its use in addressing water scarcity 
issues in the region. 
 
World Bank Surprised and Defensive 
----------------------------------- 
 
¶7.  (C/NF) Meetings with World Bank and other RDS donors 
revealed a high degree of surprise at the Jordanian 
announcement, anger at being kept in the dark about the 
Jordanian plans, and confusion about how the JRSP and RDS 
compete or complement each other.  The World Bank does not 
believe JRSP Phase 1 can be combined with the RDS since the 
RDS terms of reference do not include provisions for 
supplying water to nuclear power plants or the development of 
economic zones.  Technical clashes are also likely:  the Gulf 
of Aqaba intake location proposed by JRSP is a choice that 
the World Bank consultants have cautioned against due to 
seismic risks and flooding potential.  As a result of the 
JRSP announcement, the World Bank has suspended the start of 
new technical sub-studies until there is further clarity on 
the JRSP.  This could further delay the RDS beyond the 
projected early 2011 completion target. 
 
A Financing Project - Not an Engineering Project 
--------------------------------------------- --- 
 
¶8.  (C/NF) MWH portrays the JRSP as a financing challenge, 
rather than an engineering one.  MWH needs to raise the 
necessary $2.5 billion in financing for Phase 1 by June 2010 
to meet the scheduled 2014 Phase 1 completion.  Most elements 
of the financing plan are tied to private sector 
participation including economic development plans, supplier 
financing, equity investments, and revenues from water sales. 
 According to MWH, the JRSP pumping stations, likely to be 
the largest in the world, can only be built by 2 Japanese 
companies - which could get Japanese supplier financing. 
Given the project magnitude, MWH has also proposed setting up 
steel pipe, desalination membrane, and chlorine industries in 
Jordan to supply the JRSP as well as regional needs, further 
contributing to the economic development and employment 
 
AMMAN 00001472  003 OF 003 
 
 
rationale for the project.  MWH expects that a master 
financier would be appointed to lead and coordinate the JRSP 
financing elements.  Despite its reiterations that the JRSP 
is a private-sector fin 
anced initiative, MWH is seeking possible USG funding support 
as outlined in para 6. 
 
¶9. (C/NF) The longer term financing plan for the full JRSP 
Project (estimated at 35-40 years implementation) is 
currently targeted to be $11.5 billion with annual 
operational costs of $0.5 billion.  MWH projects that 60% of 
the JRSP operational costs could be supported from water 
revenues, 30% from the economic development zones that would 
be established along the conveyance route, and 10% from new 
taxes. 
 
Post Analysis - MWH Riding Wave of GOJ Fears 
-------------------------------------------- 
 
¶10. (C/NF) Comment:  The GOJ has long expressed its 
frustration at the slow pace of the World Bank study, the 
lack of viable funding scenarios for follow on project 
implementation, and the inherent difficulties of regional 
cooperation.  GOJ desperation on scarce water and energy 
issues has led both the water and nuclear energy camps to 
sign-up to the MWH vision of an expedited financing and 
engineering solution to alleviate many of their woes.  MWH in 
turn is feeding off this GOJ desperation and, selling itself 
as Jordan's savior, has secured a seemingly carte-blanche 
mandate to rally USG and other support to raise the necessary 
financing. 
 
¶11. (C/NF) While there is some logic to the MWH Phase 1 
approach as well as the incorporation of development projects 
to increase the financial viability, the GOJ's history of 
failed visions and projects makes it unlikely that Phase 1 
will happen on time, on budget, and meet expectations. 
Furthermore, MWH has also likely taken a few short-cuts while 
selling this expedited project and many environmental and 
engineering issues are yet to be designed, analyzed, or 
accounted for.  While the GOJ has characterized the JRSP as a 
Jordan-only project (with Israeli acknowledgement), any 
project that affects shared Gulf of Aqaba and Dead Sea 
resources is bound to be subject to regional pressures as 
well. 
 
¶12. (C/NF) Post expects there will be increasing pressure in 
Jordan and potentially in Washington for USG support for the 
JRSP.  However, Post believes it prudent to await the results 
of the World Bank led RDS study before determining the 
merits, and offering support or contributing financially or 
otherwise to any implementation solution.   End Comment. 
 
 
Visit Amman's Classified Website at: 
http://www.state.sgov.gov/p/nea/amman 
 
Beecroft