Blacklisting of Jewish banks causes worry

Press, Volume CXV, Issue 33766, 12 February 1975, Page 15

Blacklisting of Jewish banks causes worry

(By "The Times" business staff, through N.Z.P.A.)

LONDON, February 11

A confidential list of British companies believed to be bowing to Arab pressure not to negotiate business arrangements with Jewish interests is being prepared within the AngloIsrael Chamber of Commerce.

This development comes after the confirmation this week-end that N. M. Rothschild and S. G. Warburg —- two well-known city merchant banks — had been blacklisted from participating in an international loan involving Arab oil funds. No official comment could be obtained yesterday from the chamber, whose committee includes many influential Jewish businessmen. But it is understood that considerable evidence has been collected recently that the number of British companies afraid of Arab retaliation now or in the future has been increasing. A list, as yet unpublished, is being prepared to support representations to the Government for more effective counter-measures.

I Mr Lewis R. Goodman, [chairman of the executive [committee, who is also a director of Marks and Spencer, is now in Israel and believed to be discussing his members’ fears that the long-standing Arab practice of operating trade boycotts has taken on a new dimension with the power of their oil funds. More than a few companies have broken off trading relations with Israel to make exporting to the Middle East easier and to protect themselves from other sanctions. Meanwhile, it is expected that complaints about the operation of an Arab “blacklist” in the Eurobond market will be made to the accepting houses committee, generally regarded as the chief joint spokesman for London’s merchant bank fraternity. It appears that the blacklist is by no means a new feature of the international banking scene. Its contents were formulated and circu lated in a haphazard fashion three or four years ago. But what has sparked off the latest controversy is the fact that Kleinwort Benson, one of the top half dozen merchant banks said to belong to the charmed inner [circle of London accepting (houses, has admitted to [knuckling under to Arab demands by excluding S. G. [Warburg and N. M. Rothschild and Sons, the two most [ powerful British names in [Eurobond management, from the Japanese Marubeni issue I last week.

Middle Eastern interests have recently emerged as a powerful influence in the Eurobond market. It is estimated that they accounted for up to a third of the loans raised during the second half of last year, when the market sank to its lowest. But with international interest rates falling since the turn of the year, the Eurobond market is again booming and the percentage of Middle Eastern funds is expected to fall dramatically now that the major European banking houses are lining up to do business. So it is even more galling for those involved that a major British merchant bank (has chosen this particular moment to bow to Arab pressures.

In the Marubeni case the exclusion of Warburg and Rothschild would appear to be at the request of the Kuwaitis and the Libyan Arab foreign bank, which as a wholly owned State bank,

is the financial representative! of a nation that has been considered one of the less: friendly Arab Powers. But potentially more serious than last week's events in the London market are reports of the exclusion of Lazard Freres, the leading French banking house, from several recent French State loans, as well as attempts to blackball the bank’s New York operation. It is understood that blacklist victims will attempt to establish some united international front on the matter. The apparent weakness of the French banks is giving cause for concern, although the firm line taken by the German banks in recent: weeks is said to be a hopeful'■ sign.

The argument would be that accepting racial or national discrimination as a competitive weapon would be disastrous for the standing of the City of London as a major financial centre.

I Although the boycott is ■ operating only against a handful of houses at the moment and appears to be confined to the Eurobond market, there are believed to be some two dozen potential victims on the list.

The majority of the merchant banks in the City of London could, in one way or another, be deemed to fall into the category of the blacklist.

Although the movement of Arab funds has bewitched the financial fraternity for the (last six months or so, it is (argued that in banking terms [they are still a small factor, j Gilbert Sedbon, a N.Z.P.A.- ! Reuter correspondent, savs (that the floating of a SUSSO i million loan by the State-run [French Electricity Board is! [being held up because prospective Arab participants in the issue want to bar the Jewish-owned merchant bank Lazard Freres from joining the issue syndicate. Lazard Freres has already complained to the French Government that Arab pressure resulted in its being] excluded from other inter-] national loan issues.

Final terms of the planned new loan, involving the Electricity Board — Electricite de France (E.D.F.) - - are in suspense, pending a deci-: sion by the borrower on whether the issue should • ahe?d, the sources said. | Lazard led the electricity board’s first dollar Eurobond loan several j'ears ago, and was a co-manager in a more recent issue. There was some doubt in London financial quarters about the firmness of the Arab boycott policy. They pointed out that both Worburg and Rothschild have been invited to underwrite a forthcoming international bond issue in which the Kuwaiti international investiment company is a co-’ i! manager. ,! The loan is being raised by; i|the Swedish car firm, Volvo.: i[lt totals SUS2S million at 9.5 ’per cent over 10 years.