320. Telegram From the Interests Section in Baghdad to the Department of State1

1745. Subject: USG and the Arab Boycott.2

1. One of Iraq’s most important private sector importers told me on November 20 that he had observed a definite hardening of GOI position in recent weeks against U.S.-Iraqi commercial relations. While last summer he had been encouraged to explore possibilities for contracts with U.S. firms and even visited the United States with the blessings of the GOI, he is now being told to hold off on any business arrangements with U.S. companies. He attributed situation to growing GOI concern over USG action with respect to Arab boycott.

2. We have also been advised by another USINT source that Baath National Command is preparing a proposal to circulate to other Arab countries through the Iraqi Foreign Ministry calling for a boycott by all Arab states of United States goods and services if proposed US anti-boycott legislation becomes law.3 According to source, GOI is considering applying a boycott against U.S.-Iraqi commercial relations, but has decided first to sound out the other Arab states on the possibility of establishing a unified Arab position.

3. Decision of Bank of America to stop handling all letters of credit containing boycott of Israel language has also jolted Iraqis as Bank’s action came without warning and affected a number of transactions in mid-stream. Oil Ministry also resents the holding up of shipment of spare parts for oil refinery unless oil refinery’s administration agrees to change its usual boycott practices. (State 284765)4 Iraqis view this as a form of blackmail as USG was not enforcing anti-boycott measures when original contract for refinery equipment was signed.

4. GOI officials strongly resent statements in U.S. media linking Arab boycott to racism. They argue that boycott of Israel is not based on anti-Jewish racism among Arabs any more than U.S. boycott of Cuba is based on anti-Cuban racism among Americans. They dismiss the rela[Page 905]tively few instances of documented anti-Jewish discrimination as mistakes by junior officials which have since been corrected and argue that parties hostile to the Arabs have seized on these few lapses and used them to misrepresent the essentially political thrust of the Arab boycott.

5. Comment: I believe we have already reached point in this boycott affair where our commercial ties with Iraq are being seriously jeopardized. Iraqis are beginning to have doubts about reliability of U.S. as trading partner if USG is as susceptible to Zionist pressure groups as it now appears to them to be. Iraqis will be reluctant to enter into major project commitments or major purchase contracts requiring subsequent spare parts or servicing arrangements if there is danger that USG, acting under domestic political pressure, will change rules of the game after GOI has made major investments. Since Iraq is about to launch into major development programs that would involve expenditure of $35 billion over next five years, freezing out of U.S. companies is obviously a matter of serious concern, particularly when combined with potentially even more serious consequences for our commercial ties with Saudi Arabia and other Arab countries.

6. Much of the emotional heat that has made this subject so difficult for the Executive branch to deal with has been caused by the widespread confusion in the United States media on the true nature of the boycott. There seems to be a general assumption in the United States that Arab actions are based on racism, and that it is therefore immoral for the USG to permit private firms to comply. It also seems to be widely assumed that selling goods to Israel, per se, is grounds for boycotting an American firm. In fact, the boycott is more limited in scope and is different in its essential purposes than it is generally portrayed. Its thrust is political, and like most political issues, the associated moral considerations could be endlessly debated. What cannot be debated is the fact that USG reaction to the boycott may do serious damage to the U.S. economy.

7. While not underestimating the PR problems included in broaching this emotional issue to the general public, I believe that the situation has now reached the point where a well planned public educational campaign by the Executive branch is essential to prevent serious damage to fundamental U.S. national interests. While there are limits to the extent to which the State Department can engage in public education activities, I believe that an effort by the P Bureau to convey to the public a somewhat more balanced account of the boycott situation could pay off handsomely in limiting the damage to U.S. interests. If nothing else, such an effort would have the effect of focusing debate on the true issues rather than on the irrelevancies that have so far marked most of the public discussion of this complex issue.

  1. Source: National Archives, RG 59, Central Foreign Policy Files, D760441–0005. Secret; Exdis. Repeated to Abu Dhabi, Amman, Damascus, Doha, Cairo, Jidda, Manama, and Tel Aviv.
  2. Although the Arab League had maintained an official boycott of Israeli companies and goods since 1948, Arab countries in recent years had expanded the boycott to include U.S. companies that did business with Israel or were owned by American Jews.
  3. Congress was considering legislation to block U.S. companies from complying with the Arab boycott by denying them tax benefits.
  4. Dated November 19. (National Archives, RG 59, Central Foreign Policy Files, D760432–0704)