Simon's Tough Tour

Secretary of the Treasury William E. Simon jetted about the Middle East last week on two precarious assignments. The sketchy economic agreements that President Nixon struck during his own tour last month had to be translated into workable programs and, even more important, avenues had to be explored for easing the impact of higher Arab oil prices. The trip took Simon from the French Riviera to Cairo, Jerusalem and Jidda; he ran into somewhat less trouble in Arabia than on the pleasant beaches of the Riviera.

The Secretary and his entourage of 40 stopped first in Nice to bone up on research materials and let some accumulated jet lag unwind--but a Simon faux pas made the brief stopover more eventful than that. Sunning on the beach with Willard C. Rappleye Jr., editor of the American Banker, he expressed in pungent terms his longstanding opinion of the Shah of Iran * who is pushing for higher and higher oil prices and whose nation was pointedly not among the countries that the Secretary would be visiting. Said Simon: "The Shah is a nut." He later explained that he meant the description only in the sense that someone might be a "nut about tennis or golf."

Brass Tacks. In Cairo, the Secretary and Egyptian Deputy Premier Abdel Aziz Hegazi paved the way for the private investment that Egyptian planners hope will revitalize their country's flagging economy. President Anwar Sadat had already announced extensive plans for free-trade zones, but it remained for Simon and Hegazi to nail down three crucial brass tacks: 1) an agreement to reinstate a 1963 accord, suspended after the Six-Day War, that pledges Egypt not to expropriate U.S. property without compensation, 2) a plan for a "joint development institute" in Cairo to advise U.S. firms on the feasibility of Egyptian projects, and 3) the creation of "senior working groups" of Egyptian and U.S. technocrats to survey periodically such development needs as the re-equipping of the Suez Canal. No sooner had the agreements been reached than they began to pay off. Representatives of Marriott Corp. arrived to plan a 700-room hotel that Marriott will operate for the Egyptians, and this week Charles J. Pilliod Jr., chairman of Goodyear Tire & Rubber Co., is scheduled to discuss a tire plant.

The talks between Hegazi and Simon were lively and flexible. Simon never hesitated to break in with questions. When Hegazi was asked at a news conference whether he was happy with the $250 million in U.S. aid requested of Congress for Egypt, he had an adroit answer. If the U.S. could give Israel $2.2 billion in military aid, he said, then surely the same amount in nonmilitary help should be reasonable for Egypt.

Maintaining his pace, Simon began a series of meetings with government officials almost immediately upon his arrival in Jerusalem. With inflation running at an annual rate of 23% and capital reserves rapidly depleting, the Israelis needed all the help they could get.

Simon, however, had little to offer: Israeli hopes for an annual commitment of $1.5 billion for the next five years was in the hands of Congress, not the Administration. To help stanch the hemorrhage of reserves, he proposed an Israeli-U.S. trade council, similar to the Soviet-U.S. Trade Council, to encourage U.S. businessmen to invest in Israel.

At week's end the Secretary flew off to his greatest challenge--persuading King Faisal to invest his excess oil dollars in U.S. Treasury securities. Simon expects Arab oil revenues this year to reach about $60 billion, two-thirds of which he anticipates will be kept in the Arab world, leaving about $20 billion free. In Jidda, the former Wall Street securities dealer launched an effort to sell the King on investing $10 billion of his surplus in U.S. Government notes that would pay about the same as Treasury bills. Even if the Saudis accept his proposal, the notes--and the solution--will only be short term, leaving the imbalance caused by rising oil prices as intractable a problem as it was before.

--In a February television interview, the Shah said that during the oil embargo the U.S. "had imported more oil than at any time in the past." Simon described the statement as "irresponsible and just plain ridiculous."

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