Middle East Desks

A VIEW FROM
FOGGY BOTTOM

(25 Years Later)

by Dina M. Silberman

Israel hasn't become any more loveable to the fraternity of Arabists who populate the State Department's Bureau of Near Eastern and South Asian Affairs than she was 25 years ago when they fought Harry Truman so bitterly against the partitioning of Palestine. But a sense of realism has finally set in. And now that Henry Kissinger has become Secretary of State, in name as well as fact, it could be a whole new ball game.

Argument and debate are the life-
blood of Washington, a city where in-
tellect and pragmatism so often clash
and just as often compromise. But the
controversy generally centers on men
rather than organizations; and dispute
ebbs and flows to the rhythm of
personality.

This is not the case with one group, housed in the bosom of the U.S. State Department. It is called the Bureau of Near Eastern and South Asian Affairs and it is virtually the inheritor of a tradition of controversy. Its title reflects the scope of its authority: from Greece to Turkey, through Israel and the Arab states, to India and Ceylon—some 30 countries in all.

Many of these nations have become synonymous with the word conflict. But the pains of the region have, for the most part, bypassed the men who have had to deal with them. One flagrant exception is the Middle East, or Near East, if one accepts State Department terminology.

Years before the creation of Israel,
Jews were complaining of a "lack of

open mindness” on the part of State
Department officials. That charge has
persisted in spite of the multiple
changes in structure and in personnel
that the Bureau has undergone—not to
speak of the changes that the Middle
East, the United States and the entire
international system have either wit-
nessed or experienced.

No Tears

The opinion of Jewish leaders is most commonly exemplified by that of Hyman Bookbinder, Washington representative for the American Jewish Committee. "There is a feeling that if the Administration should stop being supportive of Israel," he has noted, "a good number of employees of the State Department would not shed tears." He is quick to add that "this does not suggest disloyalty on the part of the employees—just that they apparently have the feeling that the United States is being too pro-Israel."

The tenacity of this mistrust of the
State Department on the part of U.S.

Jewish leadership must be found in
the strength of its origin. It is no secret
that the Near East Bureau strongly
recommended against partition of
Palestine and the creation of an inde-
pendent Israel. Any lingering doubts
about its position have been dispelled
by private memoranda recently de-
classified and made public by the
State Department. They show a great
determination in trying to sway Presi-
dent Truman from his pro-Israel
course.

But the Jews did not only resent
the State Department for its official
posture. They resented it for what
many viewed as its attempt to hide
personal bias behind apocryphal argu-
ments. Jews who fought that battle
then remember, sometimes with a wry
smile, the reasons advanced by the
State Department to bolster its case
against Israel. One, whose notoriety
still echoes mockingly, was that in 20
years, Israel would be a communist
state, endangering American oil inter-
ests in the area. Israel, of course,
despite her socialist pretentions, has
become the favorite target of Commu-
nist invective, but the myth about her
endangering U.S. oil interests has lin-
gered on and is now being revived in
the awakening to the so-called energy
crisis.

Underlying the Department's ac-
tions was what some discerned as a
scorn for Jews, coupled with an admi-
ration for things Arab. Although some
of the scorn might have been imag-
ined, stories remain to give it cre-
dence. One colleague recalls an anec-
dote involving the journalist, I. F.
Stone during the mid 1940s. Stone

48

THE TIMES OF ISRAEL

Jan. 1974

huge reserves through the fund. The
Arab have-nots have wasted no time
in pressing their claims to a fair share
of these growing revenues. At the Ar-
ab Oil Congress held in Algiers in
mid-1972, proposals were made to
structure distribution so that all Arab
countries could partake of the
wealth. Such a move would be in har-
mony with Islamic law which de-
mands twice as much zakat - charity
- from income derived from lands
fed by God-given rain as from lands
irrigated by man.

Whether zakat or jihad (“holy war”) remains the order of the day in the Arab Middle East remains to be seen. Before the war, Arab oil money had been used to support a continuing cold war and guerilla effort against Israel. Saudi Arabia and Kuwait have agreed to pay $160 million annually to the countries that lost territory to Israel in 1967 — Syria, Jordan and Egypt. Big money is also being allocated to Palestinian terror groups, and the Kuwaiti Parliament voted in 1972 to pay $33 million in support of Syrian military activities. In addition, Kuwait has been paying off to the hawkish Iraqis — primarily to allay Iraq’s lust for Kuwaiti territory.

Use of Arab capital outside the
Mideast has gone beyond simple de-
velopment funds, Kuwait and Saudi
Arabia have agreed to aid Mauritania
in sustaining its central bank and will
help finance economic projects in
that country.

Possibility

Since the oil states have had a pol-
icy of putting their money into de-
velopment at home or safe invest-
ments abroad, it is probably true that
they incurred some losses during the
latest dollar devaluation. World-wide
monetary instability and the growing
strength of their own currency, has
prompted a growing trend among the
Arabs to move oil revenues received
in dollars and sterling back into their
own currencies. In line with this,
there has been increasing talk of es-
tablishing an Arab currency tied to
oil as the major cash medium for in-
ternational trade. This would replace
the dollar. Such a move might be-
come increasingly logical from an in-
ternational monetary standpoint as
time goes on simply because Arab
balance of payments surpluses should
make their currencies stronger than

the dollar. Were this to happen, Arab
power in the world of international
trade could become awesome.

The instruments that could put
oil-rich Arabs on the boards of the
major multinational corporations are
the joint-venture banking operations
being formed between Arab govern-
ments and private interests, and West-
ern banks - primarily European. So
far British and American banks have
chosen to go it alone, but this, too,
could change. Unless stunted, Arab
banking interests may eventually be-
come so large, they will dwarf even
such giants as Morgan Guaranty,
Bank of America, and Chase Manhat-
tan.

By far the biggest and most pow-
erful of the newly created Arab joint
ventures is the Union des Banques
Arabes et Francaises (UBAF), 60 per
cent controlled by 23 Arab banks
from 17 countries, 40 per cent by
Credit Lyonnais, a state-owned bank
and France's second largest. UBAF
already has over $700 million in de-
posits, while a new London subsidi-
ary, with the Midland Bank as mi-
nority partner, holds another $200
million. Union is headed by
Mohamed Mahmoud Abushadi, an
Egyptian trained in the United
States.

Minority Partners

UBAF does business primarily in
Europe through various subsidiaries
in each country. A leading financial
institution is usually chosen as a mi-
nority partner. Partners in Italy in-

clude Banco di Roma and Banca Na-
tionale del Lavoro; in West Ger-
many: the Commerzbank, the Baye-
rische Vereinsbank and the West-
deutsche Landesbank Gricentrale.

The French, of course, have more
than one Arab banking iron in the
fire. In addition to UBAF, they also
have a 50 percent interest (through
the Societe de Banque Suisse and
French Societe General) in Frabank.
The other half of this joint venture
is owned by Kuwait.

Other banks are being set up un-
der 100 per cent Arab control. The
Arab International Bank is an Egyp-
tian-Libyan partnership with some
Kuwaiti minority interest. It began
with a capitalization of $78 million
and is dedicated to increasing Arab
investments as well as promoting
banking and trade relations with out-
side areas. Farther afield, Arab inter-
ests have established an Arab-African
Bank to finance trade and develop-
ment in Arab and African countries.
The bank, which at the end of 1972
had deposits of almost $100 million
and had made loans totaling almost
$75 million, is dominated by Kuwait
and Egypt with 42.4 per cent shares
each, followed by Iraq with 10 per
cent and other Arab interests with
the remainder.

A joint banking venture with the
Japanese is also off and running. The
partnership links UBAF with four
Japanese banks and will be capital-
ized at $10 million. UBAF will hold
60 per cent of the shares.

Implications for Israel

This proliferation of banks is only
the first of several tentacles the Ar-
abs are spreading across the world
money market. Through them they
hope to exercise growing power over
international investment decisions
and ultimately to isolate Israel by
cutting her off from financial cen-
ters, private investments and the nor-
mal export markets for her products.
They will also try for increased eco-
nomic leverage over Israel's major
supporter, the U.S. The Arabs will
try. They have already begun; but
their efforts will have to reckon with
two rather stubborn realities—Ameri-
ca's strong aversion to blackmail or
any other form of economic pres-
sure, and Israel's military might. The
Arabs still know that neither one
can be taken lightly.

THE TIMES OF ISRAEL

47

had a habit of asking the then Secretary of State, Cordell Hull, pointed questions about American policy on the Palestine question. It was on one such occasion that Hull turned to Stone and declared: "Mister Stone, will you please tell us what the I. and the F. stand for in your name—just so we know what your real interest is in this matter?" Stone's full name is Izador Feinstein. Hull's point was obvious.

## The 'Fraternity'

Treatment of the Arabs seems to have been an entirely different matter. Area experts have long debated the extent and influence of what has come to be known as the "Arab Fraternity" within the State Department; but no one has seriously questioned its existence.

The "Fraternity" was made up of officers who had either family, cultural, linguistic or philosophical ties to the Arab world. For many a Harvard

educated foreign service officer, the genteelness of the pashas and the sheikhs who then ruled the Arab Middle East was eminently more comfortable than the brashness of the Jews lobbying for the creation of a new state.

The cultural affinity did not stop there. A good number of the officers had been posted to Arab countries and prided themselves on having acquired an appreciation for Arab ways and treasures, in many instances even a knowledge of the language.

The bond was still stronger for other members of the "Fraternity"—it was one of birth. It is hard to say how many of the Arabists at State were actually born in Arab countries. But there is no question that there were enough of them to be thought of as a group. They were the sons of missionaries who had gone to church schools, most of them to the American University in Beirut. They were a focal point of Jewish distrust, commonly

regarded as so committed as to be virtually incapable of impartiality.

And impartiality was then and still is a most sought-after commodity in the State Department in viewing a conflict that has radiated so much heat and passion. A quarter of a century after the creation of Israel, after four wars and an uneasy peace, is the State Department any closer to that goal? The question may seem somewhat ironic coming, as it does, within months of the swearing in of Henry Kissinger as Secretary of State, the first Jew in this century to occupy that post. But that, again, is a fairly recent event whose full impact on the structure and outlook of the State Department has yet to be determined. Meanwhile, the record of the Near East Bureau of State must stand on its own. How good a record that is depends on how eclectic one is. One thing is certain, however: the Bureau of 1974 is a different creature from that of 1947. The difference might

Jack Eisenberg

U.S. State Department: The fantasies of the "Arab Fraternity" at the Near East Bureau have given way to a new credibility.

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49