Israel Looks Toward Economic Boost As Gulf States Partially Ease Boycott

Jewish and governmental leaders here have joined Israeli officials in hailing the decision by Saudi Arabia and its five Persian Gulf trading partners to ease the Arab boycott of Israel.

But while applauding the Gulf states’ move last week to terminate the secondary and tertiary boycotts against Israel, pro-Israel activists said a total termination of trade restrictions against Israel were long overdue.

Israeli commentators called the move an important milestone in the peace process, and Foreign Minister Shimon Peres welcomed the decision as “an additional move in dismantling the walls of hatred and separation and boycott.’

Israeli Finance Minister Avraham Shohat said the easing of the boycott would provide a boost to the Israeli economy, which over the years has suffered the adverse effects of foreign companies fearful of ignoring the boycott.

The view from Capitol Hill was also optimistic.

“For the first time, I have some real hope that there are Arab states serious about ending the boycott against Israel,” said Rep. Charles Schumer (D-NY), co-chairman of the Congressional Task Force to End the Arab Boycott.

“This is the kind of statement I’ve been looking for,” Schumer said, adding that he hopes the six-member Gulf Cooperation Council will “do everything they can to persuade the rest of the Arab world to follow them.”

Even two years before the founding of the Jewish state in 1948, Arab countries had imposed a trading boycott against the emerging Jewish state in an effort to undermine its economy and isolate it politically.

In 1951, the Arab League extended the restrictions, imposing a secondary boycott on companies engaged in trade with Israel and a tertiary boycott on firms doing business with those companies.

The announcement to terminate the secondary and tertiary boycotts reflects a dramatic change in Arab attitudes toward Israel in the year since Jerusalem signed the self-rule accord with the Palestinians.

A number of Arab countries have unofficially ignored the boycott as a direct result of the strides toward peace accomplished on the Israeli-Palestinian front and, more recently, in Jerusalem’s improved relations with Jordan.

The announcement came in a statement issued last Friday by Saudi Arabia following an annual meeting at the United Nations between the Gulf Cooperation Council and U.S. Secretary of State Warren Christopher.

Along with actively attempting to broker peace agreements between Israel and its Arab neighbors, Christopher has placed a high priority on ending the Arab boycott.

American officials were disappointed in August, when at its meeting of foreign ministers in Cairo, the 21-member Arab League refused to put the issue of the boycott on its agenda.

That failure was largely the result of efforts by Syria, whose negotiations with Israel have been stalemated for months.

Following the August meeting, Christopher apparently turned his attention on the Gulf Cooperation Council — which along with Saudi Arabia includes Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates — hoping to achieve at least a partial break in the solidarity of countries participating in the boycott.

HEAVY PRESSURE ON THE SAUDIS

According to Israeli media reports, Christopher put heavy pressure on the Saudis.

One of the arguments he used, according to the reports, was that Prime Minister Yitzhak Rabin, given his difficult negotiations with Syria over withdrawal from the Golan Heights, needed some sort of “peace dividend” to help sway Israeli public opinion behind his efforts.

Dropping the indirect boycott against Israel, Christopher reportedly argued, was the least the Saudis could do to help advance the peace process.

One Israeli commentator noted that last Friday’s developments marked the first time the Saudis came down from the fence, went beyond verbal declarations of support for the Middle East peace process and expressed their support with an open, practical step.

As a result of the Saudi move, Israeli citizens were given the message that it is worthwhile for their leaders to take chances in the name of peace, Israeli commentators said.

That message could well bolster public support for Rabin’s initiatives on the Syrian front, according to observers.

Speaking to reporters in New York where he was attending last week’s opening of the U.N. General Assembly, Peres called upon all the Arab countries to recognize a new reality in the Middle East — that centuries-old hatreds will only serve to damage regional trading opportunities.

“The boycott has had a negative effect on the Arab countries as well (as on Israel), because today markets are more important than countries, and if you put limits to trade you limit your own capacity to trade in a changing world,” Peres said.

In Israel, Commerce and Industry Minister Michael Harish said the real benefit of the Arabs’ announcement was that it would serve as a prelude to official economic ties between Israel and Saudi Arabia and the other Gulf states.

In addition to trading opportunities lost as a result of the boycott, Israel has also suffered in the area of foreign investment, which has cost the country billions of dollars in foreign capital.

Observers believe that Israel will now benefit from the investments of foreign multinational corporations, particularly those from Europe, Japan and South Korea.

In announcing the end of the Gulf states’ participation in the secondary and tertiary boycotts, the Saudis also called on the Arab League to review its boycott policies at its next meeting, scheduled for March.

The Saudi statement was greeted warmly by David Strassler, national chairman of the Anti-Defamation League, and Abraham Foxman, the organization’s national director.

“At long last, it appears a major component of the economic war against Israel by the GCC is coming to an end,” they said in a statement.

The move “demonstrates that the Middle East has indeed entered a new era,” the ADL officials said, adding that “We hope that these developments will further encourage the Arab League to officially end the primary boycott of Israel.”

The Conference of Presidents of Major American Jewish Organizations called the move “an important step toward the repeal of the boycott by the League of Arab States, an action that could further contribute to further changing the picture of the Middle East.”

In a statement issued by Lester Pollack, chairman of the Conference of Presidents, and Malcolm Hoenlein, its executive vice chairman, the group said, “Just as we look to an end to the military and political aspects of the Middle East conflict, we hope that the economic warfare will now terminate so that all of the countries and people of the region will benefit.”

(JTA correspondent Hugh Orgel in Tel Aviv contributed to this report.)

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