Trouble in Lebanon

In the days when Gamal Abdel Nasser was a mere captain, neighboring little Lebanon was making money hand over fist as the Middle Eastern go-between for Western entrepreneurs. It avoided violent nationalism, and Western businesses turned to it as to an oasis for their Middle Eastern headquarters, transforming .the tiny, tidy state into the Switzerland of the Arab world.

Last week the Middle Eastern Switzerland turned out instead to be a little Egypt. It threatened Iraq Petroleum Co., producer of one-fifth the Middle East's oil, with confiscatory fines, warned that it might nationalize the oil company's Lebanese properties.

Equal Pay. The outburst came over the twin pipelines that the British-managed (and British-French-Dutch-U.S.-owned) I.P.C. operates between its Iraq fields and Lebanon's Mediterranean port of Tripoli. The Lebanese in 1944 gave renewed approval to an old agreement to 1) let I.P.C. run its pipes through their country, 2) exempt the company from taxation, 3) submit all disputes to arbitration. In 1947, I.P.C. began paying transit fees to Syria and Lebanon, through which its pipelines ran. Though the lines traversed Syria for 263 miles, Lebanon for only 20, I.P.C. paid each the same amount (about $364,000 in 1948). Two years later I.P.C. built a giant third line to the Syrian port of Baniyas, began laying plans for another 24-incher from the Horns (Syria) junction to Lebanon's Tripoli.

Then Syria demanded bigger transit fees. I.P.C. agreed, worked out a mileage-volume pipeline formula that would pay Syria $18 million annually, threw in an extra $23.8 million to settle past claims. Last January it offered the same arrangement to Lebanon, which asked pay equal to Syria's, though I.P.C.'s Lebanese lines traveled one-thirteenth the distance and carried half the volume.

Losing Faith. Last July, on the day Nasser seized the canal, Minister of State Saeb Salam, No. 2 man in the Lebanese government and good friend of Nasser's, brought a new weapon into the negotiations: a tax decree that abrogated the tax exemption granted I.P.C. (retroactive five years) as well as the exemption for the American-owned Tapline, which carries oil from the Saudi Arabian fields to Sidon. Salam slapped a $13 million tax bill on I.P.C., gave the company until Sept. 29 to pay, under the threat of a heavy fine. Salam had hoped to play off Tapline against I.P.C., offered it a deal. But Tap-line sided with I.P.C., argued that a contract is a contract, that difficulties should be arbitrated.

Last week, with time running out, I.P.C. struck back. It announced it had abandoned plans to route the spur from Horns through Lebanon, had begun building it to the Syrian port of Baniyas instead. The company also fired 120 Lebanese it had hoped to use on the new spur, brought anguished protests from Lebanese businessmen. Cried Right Wing Deputy Nicolas Salem: "It's easy to destroy but not everybody can build . . . Investors are losing faith in Lebanon."

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