The clandestine Saudi-Israeli ties

Saudi press abounds with reports of products tagged "Made in Israel."

saudi abdullah 224.88 (photo credit: AP [file])
saudi abdullah 224.88
(photo credit: AP [file])
"Be careful not to buy this product from our Zionist enemies. It's a pencil case that costs two riyals, but it says on the side that the price is 'six shekels,' an Israeli currency. I don't know how it got into the kingdom. In any case, beware." The writer of this message, posted on a Saudi Internet forum, would probably be outraged to learn that trade between Saudi Arabia and Israel does not end with cheap stationery. Although the countries have no official diplomatic ties, private businesspeople are finding ways to circumvent the obstacles. The Saudi press abounds with reports of products tagged "Made in Israel" that make their way into local markets; Israelis testify to Saudi oil products entering Israel under cover of foreign companies and rumor has it that a wealthy Saudi businessman, Walid Bin Talal, is planning to build a hotel in Tel Aviv. The Media Line has also learned from an informed source that the Saudi oil giant Aramco is planning a pipeline that will run through Israel and provide easy export of oil to Europe. A new Middle East? Hardly. Rumors of trade through third parties between the two countries have been circulating for years. Israel's exports to the kingdom are estimated to be on a fairly small scale, perhaps a few dozen million dollars - a drop in the ocean compared to the bulk of Israel's sales abroad. This is taking place despite an official Saudi boycott policy against openly trading with Israel, but the boycott is not the only factor stopping these low-key ties from expanding. "Even if Arab states lift the boycott, Arab people will not buy anything from Israel because of what's currently going on in occupied Arab land," says Khalid Al-Maeena, editor in chief of the Saudi daily Arab News. "As a liberal secular person I wouldn't buy anything from Israel unless they resolve the Palestine issue. Once that's done I don't think there will be a problem." Because of these prevailing attitudes and an official boycott on Israeli products, Israelis need to practice caution and discretion in dealing with the kingdom. Governments have no official statistics of the extent of trade between Israel and the Saudi kingdom, as these dealings take place away from the limelight and often involve repackaging and re-branding through third-party countries. Experts agree that the traffic of goods goes mainly from Israel to Saudi Arabia and less so in the opposite direction. For the most part, Israeli companies are reluctant to comment on their ties with Arab countries. Several companies contacted by The Media Line either denied any connection with Saudi business partners or would not divulge details. But it is no secret that such trade does exist and that Saudi and Israeli businesspeople meet regularly. "There is a certain degree of demand on the Saudi side and Israelis are pushing what they have to offer," says Dan Catarivas, director of foreign trade and international relations at the Manufacturers Association of Israel. This includes everything from fresh goods, such as agricultural products to sophisticated items, including computer chips, hi-tech, desalination technology, irrigation equipment and security systems. Falling in line with policies of the Arab League's Damascus-based boycott office, Saudi Arabia, on the official level, bans Israeli-made goods and services. The Arab boycott policy includes a secondary level, which bans trade with businesses that operate in Israel and a practically unrealizable tertiary level that boycotts businesses that have relationships with other businesses that trade with Israel. The secondary boycott - and even more, the tertiary level - is becoming increasingly hard to put into practice. Multipart items such as computers and cell phones include countless components from different countries, including those manufactured in Israel. Arab countries are relaxing the enforcement on a sweeping ban, because it limits their imports. The boycott is enforced in varying degrees, depending on the country. "The Arab boycott exists much more on paper than in practicality," Catarivas says. Upon joining the World Trade Organization in 2005 Saudi Arabia agreed to cancel the secondary and tertiary level boycotts, but maintains the primary boycott of Israeli products and services. The marketing manager of an Israeli company that manufactures water-related technology admits he is looking to break into the Saudi market, but ran into a brick wall right from the very start. "In Saudi Arabia all the projects start with a tender, and usually these tenders don't allow sourcing from Israel, so the companies bidding avoid doing business with us," he says. For his company Saudi Arabia is the largest potential market in the world, because the kingdom relies on water technology from outside. Theoretically, the company could use a third party to hide its Israeli identity, but this would involve concealing the origin of the equipment, a complicated and costly process. There's a whole industry that ensures the source of a product is concealed, Catarivas says. However, the overheads involved in this often render it unprofitable. "There are many added costs in working undercover," Catarivas says. "Today the world is so competitive that these added costs can take you out of the competition." Israeli businesspeople are mistaken when they think Saudi Arabia is a virgin market with endless potential opportunities, says Doron Peskin, head of research at Info-Prod, a company that advises businesses about Middle Eastern markets. "After a peace deal was signed between Israel and Egypt, Israelis went rushing there with pots, pans and denim trousers, and of course these were things the Egyptians already had. First you have to see what they need," he says. "Israeli exporters and manufacturers will have to work very hard to gain a foothold there," he adds. It should be noted that despite the image of Saudi Arabia as being filthy rich, the kingdom also has a high poverty rate, with many poor Saudis in the peripheries and a huge non-Saudi population that is not benefiting from the oil boom. These are also factors that can limit Israel's economic success there, Peskin adds. For these reasons, experts do not place much weight on the trade potential as a major incentive for Jerusalem and Riyadh to forge a peace deal. "Israel's economy is close to OECD levels, but it is relatively small and the goods that Israel produces can be obtained elsewhere," a Gulf-based researcher says. "Where it's indispensable they can always turn a blind eye to imports from third-party countries, but I don't think that's a major incentive for making peace." A peace agreement could allow Israel to tap into the kingdom's vast oil fields to diversify its energy oil sources, but this would be more of a perk than a necessity. Israelis still harbor a misconception that economy and business among people will bring about peace, Peskin says. "I think this perception is archaic and no longer valid. It wasn't relevant to the Middle East of 1995 and it certainly isn't relevant today," Peskin says. "Money talks," Catarivas says, "Of course there's also the political barometer. When there are events in Gaza, it's not pleasant, but at the end of the day the businessmen know how to find each other."