Political Pipeline

Even before the Six-Day War of 1967 shut down the Suez Canal, Egyptians and oil men--to say nothing of their customers in the West--dreamed of a pipeline linking the Red and Mediterranean seas. Such a link (see map following page) would make unnecessary the costly circumnavigation of Africa by the giant tankers (too fat to fit the canal) that now deliver Arab oil to European refineries. It would also produce revenues that would go a long way toward filling the big hole left in the Egyptian treasury by the closing of the canal. For all its promise, though, the pipeline seemed as unattainable as permanent peace in the Middle East--until last week, when the Egyptian government announced that an American firm had been hired to build it. Smack in the middle of the deal was Kidder, Peabody & Co., Inc., a big American investment banking firm of the kind that militant Arabs have often denounced as instruments of American imperialism.

The $345 million package is the biggest project involving Americans to be started in Egypt since 1956, when John Foster Dulles, then Secretary of State, withdrew an offer of U.S. aid for the Aswan High Dam. Appropriately enough, it was arranged by an Egyptian-born Lebanese: reddish-haired, bespectacled Roger Tamraz, 34, a Harvard Business School graduate who heads Kidder, Peabody's Mideast office. He plucked the contract from a consortium of 16 European firms that had signed a preliminary agreement to build the pipeline in 1971. Says Tamraz: "It was straight out of the golden age of merchant banking, before accountants and clerks took over so much of it."

The coup was made possible by dawdling by the Europeans. Earlier this year, the Egyptians backed out of the two-year-old commitment because the partners indulged in what Egyptian Oil Minister Ahmed Hilal described as "disgusting" bickering among themselves, besides insisting that they be paid in a bewildering assortment of currencies ranging from yen to pesetas. By contrast, Kidder's package was too good to pass up: the 207-mile pipeline would be built by Bechtel Incorporated of San Francisco, a vastly experienced international construction firm, and it would be paid for in dollars. Provided that the latest flare-up in hostilities ends in time, construction will begin early next year and is expected to be completed by 1976.

Fund Package. Kidder, Peabody and New York's First National City Bank are putting together a combination of funds, which might include money from Saudi Arabia and Kuwait, and credits and interest guarantees from the U.S. Government's Export-Import Bank. By 1977 the pipeline is expected to carry 80 million tons of crude a year, and transit fees are expected to total $150 million annually.

If the Eximbank does grant credits for the pipeline, an economic tie that has been dormant for almost ten years would be restored. Even more important, the pipeline revenues could encourage Egypt to continue its trend toward less ideological policies. With more funds, it will be able to resist the blandishments of oil-soaked, militantly anti-American Libya, upon which it has been heavily dependent for aid. Indeed, the line might even attract some business from a competitor: the Israelis' Eilat-Ashkelon pipeline. Still, the U.S. and Egypt are playing down the political possibilities. Egypt's government-controlled press has not even acknowledged that Bechtel and Kidder are American firms.

This file is automatically generated by a robot program, so reader's discretion is required.