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Behind the Headlines Bechtel Has a Little List and Israel is Included

Ever since the passage of the 1977 anti-boycott law, it has been illegal for American companies to comply with the Arab boycott of Israel. But if laws are there for the imaginative lawyer to circumvent, the anti-boycott law has undoubtedly provided work for many a creative mind.

An illustrative case concerns Bechtel, the huge engineering and construction firm which has extensive dealings in the Arab world. A 1983 memo obtained by Yale University student Jacob Weisberg and reported by him in a recent issue of the New Republic, lists Israel among ten nations that “will be excluded from any current business development activity.” The stated reason: “political sensitivities and unstable conditions.”

Asked why Israel was on the list, a Bechtel spokesperson, told Weisberg it had to do with instability, rather than “political sensitivities.” In its status as a forbidden zone for Bechtel’s commercial undertakings, Israel thus joined Iran and Iraq, which have been actively at war since 1980; Lebanon, which is embroiled in a decade-old civil war and virtually lacks a government; and Afghanistan, where Soviet troops have long been battling Afghan resistance fighters. Also on the list are the Soviet Union, Mongolia, North Korea, North Vietnam and Cuba.

REASONS FOR LISTING ISRAEL

Thomas Flynn, the Bechtel spokesperson, told Weisberg: “I’ve just been reading issues of Time and Newsweek from the period. Relations between the U.S. and Israel were icy at best.”

His examples included the “violent street demonstrations” in Israel protesting the refusal of then Premier Menachem Begin to fire then Defense Minister Ariel Sharon for his failure to prevent the massacre of Palestinians at the Sabra and Shatila refugee camps in Lebanon. Also cited was what Flynn described as “U.S. marines going barrel to barrel with Israeli forces” in Lebanon.

But the spokesperson, according to the New Republic, called the exclusion “momentary,” and asserted that it was no longer in effect. Nevertheless, officials appeared hard-pressed, Weisberg wrote, to name the date on which the memo was invalidated or to provide written proof that the Israel ban had been lifted.

The Bechtel case highlights what observers suggest are the necessary limits of the anti-boycott law. The law prohibits compliance with foreign boycotts of U.S. allies, but it states specifically that the absence of a commercial relationship does not in itself mean a boycott. And even William Maslow, the editor of Boycott Report, a monthly newsletter of the American Jewish Congress, says “There’s some logic to that.”

But it does mean that nobody should have been surprised when companies bent on staying off the Arab blacklist failed to turn around and open up offices in Tel Aviv after the law was passed nine years ago. “If a company decides not to do business with Israel, they could do it for a million reasons,” Maslow observed.

Consequently, even if Bechtel still maintains the Israel exclusion policy as stated in the 1983 memo, it seems unlikely that it could ever be charged with violating the anti-boycott law.

‘YOU NEED A … SMOKING GUN’

“You need a little bit of a smoking gun,” said Jess Hordes, associate director of the Anti-Defamation League of B’nai B’rith’s Washington office. “You need a situation where they’ve had a business opportunity and they’ve refused it — that is, where they’ve explicitly complied with the boycott.”

But the same observers maintain that despite its shortcomings, the anti-boycott law has been relatively effective. Commerce Department officials, they say, have cracked down on companies for substantive violations of the law. These often include the signing of documents affirming that a company refuses to deal with Israel, and discrimination against Jewish job applicants.

Also common are cases where companies fail to report requests from other firms for confirmation of compliance with the boycott requirements. Lateness in reporting receipt of these requests to the Commerce Department has also brought charges of violations and, ultimately, heavy fines.

CIRCUMVENT THE ANTI-BOYCOTT LAW

Another important aspect of the boycott law is the prohibition of discriminatory conditions on letters of credit issued by banks. But American banks represent only one industry which has managed to avoid dealing with Israel without getting itself into trouble with U.S. law.

No American bank has a branch in Israel, Hordes observed. The closest thing to such an American-Israeli banking relationship is the role played by Chase Manhattan as fiscal agent for government of Israel Bonds.

Then there is, of course, the petroleum industry. And even in these oil-glutted times, when Arab states have lost so much clout, the large American petroleum companies have hardly been rushing to set up drilling operations in the Jewish State.

Some Arab countries have made it easier for American firms to comply with the anti-boycott law without violating the boycott. Saudi Arabia, for example, no longer requests American companies with which it does business to provide “negative certification of origin,” which states that their products did not originate in Israel. Instead, they are now more commonly asked to declare where their products originated — a request that is not prohibited by the anti-boycott law.

Another aid that the Saudis have reportedly provided is a telephone service that allows a company to find out whether a firm with which it seeks to do business is on the Arab League blacklist. The information, according to a 1984 issue of Boycott Report, could be obtained through a call to the Commercial Section of the Saudi Embassy in Washington, with no questions asked, other than the name of the caller and of his or her company.

“In terms of U.S. law, there’s nothing that prevents the Saudis from saying what they want or from disseminating information,” Hordes said.

The Arab boycott of Israel includes a ban on dealing not only with countries that do business with the Jewish State, but with those that do business with those that do business with the Jewish State. Hence, the need to know who is on the blacklist maintained by the Central Boycott Office in Damascus.

FIRM SUED BY THE JUSTICE DEPARTMENT

The Bechtel memo obtained by Weisberg was drafted 10 years after the company was sued by the Justice Department for violating the Sherman Anti-Trust Act by complying with the requirements of the anti-Israel boycott. The suit, which preceded passage of the anti-boycott law, concluded with the company agreeing not to blacklist firms in order to abide by the Arab ban. But the reputation of Bechtel as a company set on protecting its interests in the Middle East brought apprehension to the Jewish community when Secretary of State George Shultz and Defense Secretary Caspar Weinberger were first nominated to their posts. Shultz had been the company’s president and Weinberger the head of its legal department.

Although Shultz has since established close ties with Israel and its political leadership, Bechtel and other large companies that have long shunned the Jewish State appear unlikely to follow suit in the commercial sphere. And the methods employed by these companies to avoid getting placed on the Arab League blacklist are unlikely to come under the scrutiny of the Commerce Department.

“They prioritize cases in terms of what they’re likely to do well with,” Hordes said. Nevertheless, he said the disclosure of the 1983 memo was constructive. “I’m glad (Weisberg) did the piece because it raised an issue that needed to be raised, even if in this case the law is unenforceable,” Hordes said.

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