Answer. It's not conceivable in my judgment because they don't want that. In Iran, they're going to link any investment in any country, in particular the United States, to companies which are going to provide them the increased technology, the increased know-how, increased ability to improve their economic development. An investment decision by them is an investment in their future. And, when they have 25 years left of reserves of oil at these production levels, they're not going to want to make an investment that's not going to give them that kind of a return over a long period of time. This is the point that escapes so many people. They're looking beyond their day of oil primacy, they're looking towards the future when they can have a diversified economy, one that is not relying on one industry-oil-or one other industry that they may be buying.

Question. What then are Iranians, for example, after in a deal like the Pan Am one?

Answer. The Iranian deal is an interesting point with respect to investment policy. They don't have a desire to control companies, they've made that clear. But they're not going to be reluctant to make sizable investments if that investment, in turn, is going to bring back to them something in turn of building their economic diversification program. They're very sensitive to the fact that their oil is going to run out at these current production levels. They want to ensure their future. Pan Am does provide them with that capability-there's a training program that can be provided, there's a tremendous interest in transportation. Iran has made it clear that real estate would not be something they're interested in. That wouldn't bring back something to their country in terms of economic development.

Question. Have they given others areas where they would like to invest in their future?

Answer. They would like to invest companies that provide technology, that would provide manpower training. Pan Am provides that.

Question. Is the Iranian view pretty much held by Kuwait, Saudi Arabia and the others?

Answer. No. I think it's different. Kuwait does not have as large an economic diversification and development program in their country. They're interested in real estate, they're interested in different types of investment.

Question. What kind of real estate?

Answer. Real estate development in other countries. They're making commitments, for example, in Egypt and in return they are seeking real estate in other parts of Egypt.

Question. Are there any real estate transactions in the United States besides the island off South Carolina?

Answer. Well, they have some interest in real estate out in California, but I don't know how far the negotiations have gone.

Question. Do they want to develop this real estate as resorts or be realtors in the sense of owning a housing Development? What's the philosophy?

Answer. In our discussions they indicate that they view investment in real estate as an investment in the future. It's something tangible, something concrete. Question. How about Saudi Arabia?

Answer. Saudi Arabia is like Iran in that it has a higher degree of economic development programs so they're spending a lot more money internally. Their ability to determine how much can be spent varies so that's the reason they haven't wanted to make sizable investments in long term commitments at this point. They sense they can spend a lot more money internally. However, in discussions with them, it is clear that they want to move into the equity area. No real interest has been expressed in the real estate area, but definitely into the longer term commitments and equity area. On a very conservative basis, they could not want to invest in high risk, venture capital kinds of investments. They're much more likely to make small commitments in probably large publicowned companies as a means of slowly diversifying their investment strategy. All these countries indicate that they want to be like any institutional investor with a diverse portfolio. They're not desirous of putting all their money into one company.

Question. Which of the countries will have the most money available? Answer. Well, Saudi Arabia and Kuwait will have the most surplus money available. Iran will be spending a tremendous amount of money internally and will be able to absorb that. And they've indicated that they could potentially be in a deficit position in anywhere from a year to two years. Saudi Arabia and Kuwait will not be.

Senator HELMS. I have no further questions.

Senator WILLIAMS. This is under a headline "Simon Says."
Senator Javits?

Senator JAVITS. Thank you, Mr. Chairman, for again allowing me to join you today in lieu of testifying.

May I make a very brief statement and ask a question or two, Mr. Chairman?

Senator WILLIAMS. Yes.

STATEMENT OF JACOB K. JAVITS, U.S. SENATOR FROM THE

STATE OF NEW YORK

Senator JAVITS. Mr. Chairman, I have heard the testimony with great interest. There are two questions, however, which the testimony does not really cover, and both represent the unusual situation which is presented to us. One concerns the attempts-and they seem to be well documented-by Arab States and companies to extend the boycott against Israel to Jews and Jewish-related business in the United States.

The reprehensible behavior, already so characterized by the President, is entirely repugnant to our society and its Constitution.

We should not permit it. Whatever the economic weight of the Arab States, this weight is wholly insufficient to cause us to bow to that kind pressure. I am confident our country can and will stand up to such coercion.

Now, Senator Williams contemplates an amendment to S. 425, which I have the honor of joining in, and I hope others would, too, which prohibits companies, individuals, from engaging in discriminatory practices and acquiring more than 5 percent of the stock of an American corporation.

The broader issue is the matter of U.S. policy with respect to foreign investment generally, and the OPEC counties investments in particular.

The missing link there and I found that so from Mr. Robinson's testimony-is that this kind of foreign investment is being treated as a normal foreign investment, which we and other countries welcome. As you and Jack Bennett point out, we have an enormous stake in the legitimacy of that kind of amendment, because we have invested far more abroad than so far they show any prospect of investing here, but the big difference is the political iron.

The investment which is being made here by the OPEC countries that we have seen so far, has the danger of trying to drive a wedge of what is in the United States highly repugnant to our traditions of religious and ethical discrimination into our society, through the use of this enormous sum of capital investment.

And secondly, it is completely unrelated to the benefits which traditionally flow from foreign investment like our own; to wit, technology and managerial skills.

The Arab States offer money, no question about that, but serious students of foreign investment have also seen foreign investment as a package, with the benefits from technology far outweighing the benefits of the capital transferred. That is the second differentiation.

First, they are trying to force religious discrimination through the use of their money; second, they bring only sterile money, without technology and without managerial skill; and third, this is investment by foreign governments. It is not investment by individuals or corporations making decisions respecting the desirability in a profit sense, or undesirability of a particular investment, except in a second

ary way.

They are trying to farm out lots of money because they don't know what else to do with it. And the governments are doing it, with heavy political motivations.

Then, we don't know at this time what strategy lies behind their investment. If you are going to use investment for political purposes, you can use it to stifle domestic development, like energy development; you can use it to cripple defense industries.

Now, it doesn't take much imagination to see how that can be done, even though technically the label on the bottle says everything is fine, and all we want to do is put some money out and draw a good

rate or return.

Mr. Chairman, the other matter which I would like to call to the committee's attention, is that in most OPEC countries, U.S. oil companies, multinational corporations, have been nationalized and are in the process of being taken over by the governments.

As far as their products are concerned-this is happening in many raw material producing countries. It is already a situation which is far advanced. We have bauxite in Jamaica. You may have copper in Chile. There is no effort to undo that nationalization, even with a new administration. You have nationalization in Peru.

Now, the whole question, therefore, Mr. Chairman, which I think we have to pose for the departments, is that this is no longer the good old-fashioned game of treaties of friendship, commerce, and navigation, which gentlemen politely reciprocate with each other, the privileges of foreign investment.

There is a new element, the political element, and as Senator Helms properly said, an element where we are possibly made or could be made a tool of warring parties for the purpose of promoting the war on the one side against the other; to wit, the Arab side against Israel.

Therefore, Mr. Chairman, I strongly support legislation to be reported out of this committee. It doesn't have to be precisely the chairman's bill. The chairman and I work together frequently. He doesn't have his feet fixed in concrete, but we must ask the departments, in my judgment, Mr. Robinson, to think anew and plan anew, because there is a new situation.

As one reads your testimony, it is the good old State Department package, if you will forgive me; listen to it yourself in light of what I just said.

You say:

To what extent and in what way those governments can invest those reserves in the United States is clearly a matter of urgent concern both for the Congress and for the executive branch.

You say:

We are indeed faced with a new situation created by the accumulation of massive investable reserves in the hands of a relatively few oil-producing countries.

Not a word in there about the political promoting of these investments, about the fact that there is a war on, and that this is an element of war.

The Arabs say so. They say they put a boycott on the world. They jacked up the price in order to make the world do what they want to do in the war against the Israelis. That is what they say.

You know, we learned from Hitler, you have to take them at their word.

So, Mr. Secretary, I respectfully submit that the departments have to begin to come in with all their expertise and knowledge in a much more sophisticated way than this testimony would indicate.

We have a totally new and very difficult situation. Now, if you will turn to us and tell us in the Congress, well, gentlemen, not withstanding the fact that we recognize all these facts, we still think the Interagency Committee and the centralized bureau for the purpose of getting information and the inviting of these foreign countries to sell to us is adequate, and defend it but defend it in the light of the hard realities we face, not in terms of good old-fashioned hands across the sea, which no longer is operative in this particular situation.

I would be happy, Mr. Robinson, if you would comment any way you see fit on what I just said.

Mr. ROBINSON. I don't disagree with your basic analysis. I think that we do have a new problem. We have to recognize it as a new problem.

I think that we have to look at the political issues, recognize that governments are going to be involved in the investing end. Therefore, governments must be more involved on the receiving end.

However, the basic premise on which we have developed our foreign policy is that it is in our interest to encourage the free flow of trade and investment, if it is properly oriented to our national interest. That is a basic principle which I don't believe should be abandoned by the current problems that we face.

The question is how do we secure this investment which we need: We need it to support the productive capacity of our industry; we need it to stabilize our economy in terms of employment. In my judgment, we are going to face a very serious capital shortage in the years ahead when we move out of our global recession.

We have pushed the investors from the OPEC countries from shortterm deposits in banks, which we felt was essential to our balance of payments, to resolve our balance of payments problems.

We are urging them to go into longer-term involvements of one type or another, equity as well as loans. Ultimately, we have to find a way to transfer real assets, goods and services, to pay for the oil that we are importing.

We want to minimize that through development of conservation and alternative sources, but basically, we must find a way to encourage and maintain the flow of proper investment, recognizing that, if necessary, our laws must be changed to assure that that investment will behave in a way that is consistent with our standards of morality, our laws, and with our national interest.

This is the challenge that we face. I agree we must face it with vision, with an understanding and perception of the change in the nature of the problem, but the solution must be one of planning a

proper basis for that flow of funds that is consistent with our national

interest.

This is what we are seeking to do in our present study.

Senator JAVITS. May I ask one other question, Mr. Chairman.
Senator WILLIAMS. Yes.

Senator JAVITS. Mr. Robinson, I would like to ask you a question— If I were your lawyer I would say think it over before you answer. [Laughter.]

Senator JAVITS. You may wish to consult the Secretary of State; and I am moved to ask you a question; must we have this investment even if it breaks down and fractures the constitutional policy of the United States against discrimination on ethnic and religious grounds? Must we have this investment even if it jeopardizes the interest of the United States in respect to the control of enterprises whose operation is essential to the security and the prosperity of our country because all of these authorities may be used for political ends which will change or endeavor to change the basic form policy of our country?

In other words, are we in such a condition that we must have it, whatever the cost? Or do we have the option?

Sure, we would like to have it; and I believe in joining with you. and saying it is highly desirable that you have these investment flows. Well, you know, Mr. Robinson, as well as I, that many argue that all we are going to do is be the sucker again. We get all of this money and lend it out to people who will not be able to repay it, and we will repay it ultimately. Be that as it may-and that's a matter for the Foreign Relations Committee and the International Economic Policy Subcommittee to address another day.

I think the fundamental moral question again arises in the Congress. I would like to give you an analogy. We had hoped very much to make a trade deal with the Russians. We held it up because of certain moral considerations. The Congress overwhelmingly went along with that moral consideration; and the Russians chose to renounce the trade agreement for the present. I think it will all come into focus again, but for the present it is renounced.

I saw no erosion in the Congress whatever of the support for that moral position. I think that's a very important point about the strength of our country.

I am asking you the same thing about these OPEC country investors.

Mr. ROBINSON. Perhaps I should consult my lawyer but I don't think so, because I think I have already answered it. I just didn't do it very effectively.

I agree that it would be better to say that "it would be desirable to have this investment," than to say, that "we must have this invest ment." I did say it must be on a proper basis that is in conformity with our moral standards, our laws, and is consistent with our national interest. I think I have stated what I understand is your principle and one that I can fully support.

Senator JAVITS. I agree with you.

May I add one other consideration and see if you agree.

Isn't it a fact that this is money exacted from the world, not for good economic reasons; isn't it generally agreed even by the most