The Gnomes of Araby

Reflecting the deep distrust that Arabs once felt for banks, the Sheik of Abu Dhabi ten years ago stashed his oil money in the dungeon of his palace, where he could keep an eye on it--even though rats kept nibbling away at his profits. Now the rich gush of oil cash into Abu Dhabi and such other Arab states as Kuwait, Saudi Arabia and Libya has forced a change of attitude.

Laden with great wealth, the Arabs are turning into bankers themselves and becoming a major force in world finance.

Heavily supported by their governments' funds, they have formed four major banking consortiums in partnership with powerful and prestigious European, Japanese and American institutions. The consortiums are:

> Union des Banques Arabes et Franc,aises (or UBAF), formed in Paris in 1970 with more than $700 million in assets. UBAF is 40% owned by Credit Lyonnais but controlled by 23 Arab banks. The president is U.S.-educated Mohamed Mahmoud Abu Shadi, former chairman of the National Bank of Egypt. UBAF has subsidiaries in London, Rome, Frankfurt, Luxembourg and Tokyo. Partners of these subsidiaries include several big European banks and The Bank of Tokyo.

> Banque Franco-Arabe d'lnvestissements Internationaux (or FRAB), started in Paris in 1969 by the Kuwait Investment Co. in partnership with the French Societe Generale and the Societe de Banque Suisse. It has $180 million in assets, and its vice president is Abdel Aziz El Sagar, former speaker of Kuwait's Parliament.

> The European-Arab Bank, headquartered in Luxembourg and made up of 16 Arab institutions (including FRAB) and seven European banks. Less than a year old, this group has opened subsidiaries in Brussels and Frankfurt and plans branches in Paris and Milan.

Its president is Abdel Moneim El-kaissouni, onetime Egyptian Deputy Premier under Nasser.

> La Compagnie Arabe et Internationale d'Investissement, incorporated in Luxembourg in January. Owned by 24 Arab and Western banks, including Bank of America, it opened its first subsidiary in April in Paris. The vice chairman is Philippe Takla, former Foreign Minister of Lebanon.

The Arab bankers stress that their main aim is to channel into long-term investments a growing share of the oil money flooding the Mideast ($12 billion in 1971, an estimated $60 billion a year by 1980). Says El-kaissouni, a graduate of the London School of Economics: "This kind of mixed Arab-European bank is a way for the Arabs to have a greater share in the management of their funds and a greater participation in the profits." He also sees the banking partnerships as a triangle involving "the technical financial skills of Europe, the capital of the Arabs and the natural resources of the Arab world and Africa."

Some Western businessmen fear that the Arabs' real purpose is to take over whole foreign industries, especially petroleum refining and marketing.

UBAF's Abu Shadi insists that the Arabs plan no wholesale takeovers, but they do intend to buy into Western oil companies. Those who are not reassured might contemplate the fact that the Arabs have a far more dangerous alternative use for their money. They could buy up gold or whatever currency looks strongest at the moment--a practice that has already helped force two international monetary crises. But as it is written in the Koran (Surah IX:34): "They who hoard up gold and silver and spend it not in the way of Allah, unto them give tidings (O Mohamed) of a painful doom."

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