Israel, Arab World Engage in Hidden Trade


Associated Press
Date: 12-26-05

Staff members at a Riyadh hospital got a surprise when they looked at the fine print on the paper cups they were using. Workers in a storeroom at a Dubai hospital were similarly shocked when they took a close look at the tags on a large shipment of uniforms, towels and sheets.

The labels said "Made in Israel," according to recent newspaper reports from Saudi Arabia and the United Arab Emirates, both of which have laws that ban imports from the Jewish state.

Experts say the camouflaged trade, with just a small portion receiving publicity, has been going on for years between Israel and its officially hostile Arab neighbors.

The hidden trade is worth about $400 million a year _ about two and a half times what Israel sold to its official Arab trading partners, Egypt and Jordan, in 2004 _ said Gil Feiler, the director of Info-Prod Research, a Tel Aviv consultancy specializing in Arab markets, and an economic professor at Bar Ilan University.

Others say such estimates are significantly inflated.

"All the figures are very sexy for the press, but the reality is much less than what is written," said Dan Catarivas, foreign trade director at the Israeli Manufacturers' Association.

The true amount of Arab imports from Israel is impossible to establish because neither side makes it public, with Israeli-made goods moving to Arab customers through third countries _ Cyprus or the Netherlands, for example, which list the shipments as local exports.

An Arab lawyer who specializes in trade, Omar Obeidat of Al-Tamimi & Co. in Dubai, said the Arab League boycott of Israel is well enforced, despite the hidden trade through third countries.

"The only person who can confirm is the Israeli party to this covert operation," Obeidat said, when asked to estimate the worth of goods flowing to Arab nations.

Feiler, who has written a business guide to Israel in Arabic, refused to give more than rough outlines of the trade, which he supports.

Israeli exports to Arab countries, he said, are mostly from three categories: agricultural equipment, such as for irrigation _ a field in which Israel leads the world; animal vaccines and "technological knowledge and components." He refused to elaborate on the latter.

Feiler said the Israeli origins of products is hidden by methods other than third-country exports. Arabs of Lebanese origin in Israel sell counterfeit Lebanese certificates of origin complete with forged government stamps. Some Israeli factories have departments of so-called quality control _ where any Hebrew writing or 'Made in Israel' marks are removed from product components.

"I saw it with my eyes," he said.

Some ships even sail from the northern Israeli port of Haifa to Beirut, Lebanon, Feiler said. The Beirut Port Authority would deny the practice exists.

Sending Israeli products to Gulf states is easier, said Doron Peskin, research director at Info-Prod. "The difficult thing is not to make mistakes."

What probably happened in case of the paper cups, for instance, was a delivery manager shipping the wrong boxes _ those not stripped of Israeli markings. The Arab News quoted the purchaser of the cups as saying they arrived in a cardboard box that looked exactly the same as the ones he normally received.

Bahrain's recent decision to abandon the Arab boycott provoked an uproar in the Gulf state. While legislators sought to reverse the decision, the government insisted the move did not signal a normalization of ties with Israel, but was implemented to ensure the U.S. Congress approved a free trade agreement with Bahrain.

The United Arab Emirates and Oman are expected to follow Bahrain's lead as they negotiate free trade agreements with the United States. When Saudi Arabia joined the World Trade Organization last month, it quietly said it would treat all members equally. Israel is a WTO member.

But there is a big difference between decisions in principle and the open flow of Israeli goods. As the big Saudi food retailer Turki al-Sharbatly said recently: "If I bring Israeli products into my shop, no one will deal with me."



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