AD-A257 312 NAVAL POSTGRADUATE SCHOOL Monterey, California DTIC S (cid:1)ELECTE 9 '9 1 9 NO V E THESIS " THE ARAB BOYCOTT OF ISRAEL ECONOMIC POLITICAL WARFARE AGAINST ISRAEL by BON ELIYAU ZEEV GILAT =N DECEMBER, 1992 (cid:127)(tD Thesis Advisor: RICHARD DOYLE 00 Approved for public release; distribution is unlimited S, Unclassified SECURITY CLASSIFICATION OF THIS PAGE REPORT DOCUMENTATION PAGE Ia. REPORT SECURITY CLASSIFICATION I b. RESTRICTIVE MARKINGS Unclassified 2a. SECURITY CLASSIFICATION AUTHORITY 3. DISTRIBUTION/AVAILABILITY OF REPORT Approved for public release; distribution is unlimited. 2b. DECLASSIFICATION/DOWNGRADING SCHEDULE 4. PERFORMING ORGANIZATION REPORT NUMBER(S) 5. MONITORING ORGANIZATION REPORT NUMBER(S) f6a. NAME OF PERFORMING ORGANIZATION 6b. OFFICE SYMBOL 7a. NAME OF MONITORING ORGANIZATION Naval Postgraduate School (Ifapplicable) Naval Postgraduate School 1 55 6c. ADDRESS (City, State, and ZIP Code) 7b. ADDRESS (City, State, andZIP Code) Monterey. CA 93943-5000 Monterey, CA 93943-5000 8a. NAME OF FUNDING/SPONSORING 8b. OFFICE SYMBOL 9. PROCUREMENT INSTRUMENT IDENTIFICATION NUMBER ORGANIZATION (If applicable) 8c. ADDRESS (City, State, and ZP Code) 10. SOURCE OF FUNDING NUMBERS Program Element No. Project No TaskN o. Work Unit AUofl Nu.*e~r 11. TITLE (Include Security Classification) The Arab Boycott of Israel Economic Politcal Warfare Against Israel 12. PERSONAL AUTHOR(S) Eliyau Zeev Gilat 13a. TYPE OF REPORT 13b TIME COVERED 14. DATE OF REPORT (year, month, day) 15. PAGE COUNT Master's Thesis From To December, 1992 122 16. SUPPLEMENTARY NOTATION The views expressed in this thesis are those of the author and do not reflect the official policy or position of the Department-of Defense or the U.S. Government. 17. COSATI CODES 18. SUBJECT TERMS (continue on reverse if necessarya ndi dentify by block number) FIELD GROUP SUBGROUP International Relations, Middle East, Arab-Israeli Conflict, Arab Boycott of Israel 19. ABSTRACT (continue on reverse if necessary and identify by block number) This thesis examines the effectiveness of the Arab boycott of Israel from an economic and a political perspective. This study covers the Arab boycott from 1946 until 1990. It demonstrates that economically and politically, the Arab boycott had three distinct phases. The first of these was the period from the declaration of the Arab boycott in 1946 until the 1973 War. The second phase took place between the 1973 War and the 1979 peace agreement between Israel and Egypt. The third phase began with the 1979 Egyptian-Israeli peace agreement and ends in 1990. This study suggests that the boycott was most effective when supported by the threat of an oil embargo in effect between 1973 and 1979. US. actions against the Arab boycott were also effective. Finally, this thesis contends that the 1979 peace agreement between Israel and Egypt brought frustration to those who expected that Israel's trade with such a close and large country as Egypt would open a huge trade market. In sum, the Arab boycoptt did not succeed in destroying Israel's economy, as was its declared intention. 20. DISTRIBUTION/AVAILABILITY OF ABSTRACT 21. ABSTRACT SECURITY CLASSIFICATION E IIUNCLASSIFIED/ULMITED SAMAES R EPORT OTIUCS ERS Unclassified 22a. NAME OF RESPONSIBLE INDIVIDUAL 22b. TELEPHONE (Include Area code) 22c. OFFICE SYMBOL Richard Doyle 408 646-3302 1A S/Dy DD FORM 1473.84 MAR 83 APR edition may be used until exhausted SECURITY CLASSIFICATION OF THIS PAGE All other editions are obsolete Unclassified Approved for public release; distribution is unlimited. The Arab Boycott of Israel Economic Political Warfare Against Israel by Eliyau Zeev Gilat Commander, Israeli Navy Submitted in partial fulfiliment of the requirements for the degree of MASTER OF SCIENCE IN MANAGEMENT from the NAVAL POSTGRADUATE SCHOOL December, 1992 F.E~ Author: Eliyau Zeev Gilat Approved by: Advisor Doyejhesis MRc JJo,n(cid:127) es, Second Reader DeparDtmaevnidt Ro.f AAWdiAinWls taCthaveSience ii ABSTRACT This thesis examines the effectiveness of the Arab Boycott of Israel from an economic and a political perspective. This study covers the Arab boycott from 1946 until 1990. It demonstrates that economically and politically, the Arab boycott had three distinct phases. The first of these was the period from the declaration of the Arab boycott in 1946 until the 1973 War. The second phase took place between the 1973 War and the 1979 peace agreement between Israel and Egypt. The third phase began with the 1979 Egyptian-Israeli peace agreement and ends in 1990. This study suggests that the boycott was most effective when supported by the threat of an oil embargo in effect between 1973 and 1979. U.S. actions against the Arab boycott were also effective. Finally, this thesis contends that the 1979 peace agreement between Israel and Egypt brought frustration to those who expected that Israel's trade with such a close and large country as Egypt would open a huge trade market. In sum, the Arab boycott did not succeed in destroying Israel's economy, as was its Accesion For declared intention. NT19 CRA&I DTIC TAB Unannounced 0 Justification °,¢ 'Q UALITY U,. V, 4 By . . . ._.. Distribution I Availability Codes Avail and I or Dist Special TABLE OF CONTENTS I. INTRODUCTION ................... 1 A. RESEARCH QUESTION .............. ............... 2 B. SCOPE OF THE THESIS ............ .............. 3 C. METHODOLOGY ................. .................. 3 II. INTRODUCTION TO THE ARAB BOYCOTT ...... ......... 5 A. THE ARAB LEAGUE .............. ................ 5 B. THE PRIMARY BOYCOTT ............ .............. 6 C. THE SECONDARY BOYCOTT (1948) ........ ......... 7 D. EXTENDED SECONDARY BOYCOTT - (TERTIARY BOYCOTT) 7 E. BLACKLIST .................. ................... 8 F. HOW THE ARAB BOYCOTT WORKS ......... .......... 9 III. THE ARAB BOYCOTT FROM 1946 UNTIL THE 1973 WAR . . 12 A. THE BOYCOTT OF COCA-COLA ..... ........... 14 B. ANALYSIS OF THE DATA ON FIRMS AND SHIPS BOYCOTTED ............ ................... 16 ........ ............... 18 SANALYSIS D. OTHER ASPECT OF EFFECTIVENESS .. ........ 22 . E. POLITICAL ANAIYSIS ....... .............. 26 F_-.. U.S. RESPONSBIT0 THE BOYCOTT, 1946 - 1973 . . . 31 -Go-.CONCLUSION-'... ...... ......... .......... 32 iv IV. FROM THE 1973 WAR UNTIL THE 1979 PEACE AGREEMENT BETWEEN ISRAEL AND EGYPT ...... ............. 36 A. THE 1973 WAR AND THE BEGINNING OF THE OIL EMBARGO .............. .................... 36 B. ECONOMIC ANALYSIS ........... ............... 40 C. GENERAL ANALYSIS OF ISRAELI TRADE, 1973 - 1979 41 D. POLITICAL ANALYSIS ......... .............. 53 E. U.S. RESPONSE TO THE ARAB BOYCOTT, 1973 - 1979 59 F. CONCLUSIONS ............ .................. 63 V. THE ARAB BOYCOTT FROM THE 1979 PEACE AGREEMENT UNTIL 1990 ............... .................... 66 A. ECONOMIC ANALYSIS .......... ............... 68 B. ANALYSIS OF ISRAELI TRADE, 1979 - 1990 . . .. 68 C. POLITICAL ANALYSIS ......... .............. 80 D. U.S RESPONSE TO THE ARAB BOYCOTT, 1979 - 1990 86 E. CONCLUSIONS ............ .................. 89 VI. GENERAL CONCLUSIONS ........... ............... 92 APPENDIX A. THE BOYCOTT AFFIDAVIT ..... .......... 96 A. THE AFFIDAVIT ............ ................. 96 APPENDIX B. THE ARAB BOYCOTT CERTIFICATE OF ORIGIN . . 97 A. THE CERTIFICATE OF ORIGIN .... ........... 97 v APPENDIX C. THE ARAB BOYCOTT QUESTIONNAIRE ...... .. 98 A. THE QUESTIONNAIRE .......... ............... 98 APPENDIX D. DOCUMENTS EVIDENCING BOYCOTT COMPLIANCE 101 APPENDIX E. UNIFIED LAW ON THE BOYCOTT OF ISRAEL . 104 LIST OF REFERENCES ............. .................. 105 INITIAL DISTRIBUTION LIST .......... ............... 113 vi LIST OF TABLES Table I. COUNTRIES WITH COMPANIES APPEARING ON ARAB BOYCOTT LIST FOR THE FIRST TIME (BY YEAR) 16 Table II. ESTABLISHMENT BY SECTOR & SHIP: NUMBER OF FIRMS BOYCOTTED AND NUMBER OF FIRMS DELETED FROM BOYCOTT LIST 1954-1968 ......... .. 17 Table III. ISRAEL STATISTICAL SUMMARY 1950 - 1970 . 20 Table IV. ISRAELI IMPORTS 1950 - 1970 ......... .. 21 Table V. ISRAELI EXPORTS 1950 - 1970 ......... .. 21 Table VI. ISRAEL'S TRADE WITH THE U.S. AND JAPAN 1966 - 1970 ........... ................. 23 Table VII. JAPAN AND THE ARAB WORLD TRADE 1966 - 1970 ............... .............. ... 24 Table VIII. THE U.S. AND THE ARAB WORLD TRADE 1966 - 1970 ............. .................. 25 Table IX. ISRAELI IMPORTS FROM MAJOR COUNTRIES 1973 - 1979 ............. .................. 41 Table X. ISRAELI EXPORTS TO MAJOR COUNTRIES 1973 - 1979 ............. .................. 42 Table XI. TRADE BETWEEN JAPAN AND SELECT ARAB COUNTRIES 1973 - 1979 .... .......... 46 Table XII. TRADE BETWEEN THE U.S. AND SELECT ARAB COUNTRIES 1973 - 1979 .......... i, . . 49 vii Table XIII. NUMBER OF BLACKLISTED COMPANIES AND SHIPS FOR TEN MAJOR COUNTRIES (1976. ....... .. 52 Table XIV. ISRAELI IMPORTS FROM MAJOR COUNTRIES 1979 - 1990 ............. .................. 69 Table XV. ISRAELI EXPORTS TO MAJOR COUNTRIES 1979 - 1990 ............. .................. 70 Table XVI. ISRAELI TRADE WITH EGYPT 1979 - 1990 . 74 Table XVII. TRADE BETWEEN JAPAN AND SELECT ARAB COUNTRIES 1981 - 1990 ... .......... 76 Table XVIII. TRADE BETWEEN THE U.S. AND SELECT ARAB COUNTRIES 1981 - 1990 ... .......... 78 Table XIX. BOYCOTT REQUESTS REPORTED BY U.S. FIRMS 1965 - 1983 .......... ............... 88 viii I. INTRODUCTION The Arab boycott of Israel, which began two years before Israel achieved independence, has now been in effect for 46 years. The first formal declaration of the boycott stated that "Jewish products and manufactured goods shall be considered undesirable to the Arab countries". [Ref. 1] As the years passed, the boycott was expanded in an attempt to prevent any trade between Arab countries and international companies that traded with Israel. Since 1946, several important factors in Middle East politics and economics have had an impact on the boycott. This thesis analyzes these major events and their effect on the boycott of Israel. Arab oil, which was the major Arab export to the Western countries and Japan, is a significant factor in detxrmining the impact of the Arab boycott. The role of the U.S., which makes up a major part of the trade with the Arab countries and with Israel, is also significant in determining the impact of the Arab boycott. The thesis examines the boycott from a chronological perspective. It analyzes changes in the direction of the Arab boycott through its 46 years of existence. The thesis is divided into four chapters showing the main regional political events that developed in the Middle East. Except for the first chapter, all chapters are built in a structure which 1