New York (Mar. 5)
— Armed with surpluses totaling billions of dollars — and growing
each year — Arab oil producing states are building a new international banking system, the American Jewish Congress reported in the latest issue of its publication, Boycott Report.
Warning that Organization of Petroleum Exporting Countries (OPEC) petrodollars could give the Arabs “unprecedented influence over Western economics and politics,” Boycott Report said the OPEC surplus of $7 billion in 1973 has grown to $343 billion. Of this sum, $120 billion was added in 1980 alone. Arab countries which formerly borrowed through international bond and credit markets are now increasingly turning to Arab banks, according to the Boycott Report. It added:
“In the last few months, every major syndicated loan from the Mideast has been led or coled by an Arab institution. A further signal of the decline of American bank influence in the Mideast is the sale by Citibank of control of its branches in Saudi Arabia, a sale compelled by Saudi authorities. All other foreign banks in that country have already been nationalized.”
FIVE TYPES OF ARAB BANKS
According to the AJCongress report, there are five types of Arab banks:
Government banks (or the treasury departments of Mideast states) which act directly as commercial banks — for example, the Saudi Arabian Monetary Authority (SAMA).
Arab development banks, such as the Islamic Development Bank and the Arab Fund for Social and Economic Development, which make subsidized loans to Moslem countries suffering from oil deficits.
Quasi-governmental banks, such as the Kuwait Investment Co.; Kuwait Foreign Trade, Contracting and Investment Co.; and Kuwait International Investment Co., which play a large role in the Eurodollar underwriting.
Consortium banks, such as the Union de Banques Arabes et Francaise (UBAF) and Banque Arabe et Internationale de’Investissment (BAII), in which many American and European banks participate.
“Private” banks, such as the newly-formed Arab Banking Corp. (owned by Kuwait, Libya and Abu Dhabi), which has an authorized capital of $1 billion and engages in loan syndications, project-and trade-financing and Eurobank trading.
BUYING EQUITY INTERESTS IN U.S. BANKS
An indication of the flow of petrodollars is the plan of the National Bank of Abu Dhabi to establish a branch in Washington, D.C. to be used to recycle oil money through the Western hemisphere.
Meanwhile, Boycott Report disclosed that Arab efforts to buy equity interests in U.S. banks continue. Suliman Olayam has acquired stock in nine banks, including a 7.5 percent stake (together with his partner, Prince Khaled of Saudi Arabia) in the First Chicago Corporation, the ninth largest bank holding company in the country.
In the other eight banks in which Olayam has invested, his holdings are about one percent. They include Chase Manhattan (New York), Mellon (Pittsburgh) and major bank institutions in Cleveland, Honolulu, Los Angeles, Miami, Minneapolis and Phoenix.
In addition, Boycott Report said, a group of Arabs led by Sheikh Kamal Adham, former Saudi chief of intelligence, has purchased shares of Financial General Bankshares, Inc. of Washington, D. C. for $160 million. Another shareholder is Abdullah Darwaish, said by Forbes Magazine to be acting on behalf of the royal family of Abu Dhabi.
ARABS FLOCK TO U.S. STOCK MARKET
At the same time, purchases of shares in American companies by Arab investors have reached record levels, according to Boycott Report. It quoted a report by the Securities Industry Association that Arab purchases jumped from $962 million in the first quarter of 1980 to $1 billion in the second quarter and $1.7 billion in the third. The record investment in American securities was attributed to the drop in the price of gold and other precious metals. These figures do not include stocks purchased by Arab banks or governments.
To service these purchases, Petra Capital Corporation has been established, with Peter Tanous as its director. It is now seeking membership in the New York Stock Exchange. If accepted, it will become the first Arab-owned investment banking firm on the Exchange. Tanous and his associate, William Hanna, are of Lebanese descent. Petra is a wholly-owned subsidiary of a Netherland Antilles corporation, 70 percent of whose shares are held by Arabs, the Boycott report said.
One indication of the importance of Arab holdings in U.S. firms, the AJCongress report stated, was the recent election of Olayam to the Board of Directors of the Mobil Corporation, the first time an Arab has been elected director of a major oil concern.
Despite the record amount of purchases, Boycott Report said, all of the OPEC nations combined owned only one percent of the corporate stock of American companies as of the end of 1978, the latest year for which complete figures are available.