The Truth About Jewish Assets In Iraq

by Professor Yehouda Shenhav of Tel-Aviv University

"Jewish assets in Iraq were ex-propriated twice, once by Iraq and then by Israel"

Between 1948 and 1951, Israel faced two analogous demands. First, it was implored to compensate Palestinians who had become refugees as a result of the War of Independence, and whose property had been nationalised by the General Trusteeship of the State of Israel. Second, Iraqi Jews and their representatives in the Israeli government - Minister of Police Bachor Shitreet was the most prominent - were pressed for compensation for the assets they had left behind in Iraq.

My study aimed to show how Israel established a connection between these two demands, and then freed itself from both of them. Ultimately, Israel justified its refusal to compensate the Palestinians on the grounds that the Iraqi Jews had also suffered deprivations, and urged the Iraqi Jews to demand restitution from Iraq.

Zionist activity in Iraq began during World War II. But it was only at the war's conclusion, when the dimensions of the Holocaust became known, that the Iraqi Jewish community was considered a potential alternative source for increasing the Jewish population of Palestine.

The Jewish community within Iraq was not Zionist-oriented, as the emissaries soon discovered. As an overwhelmingly bourgeois community, the Iraqi Jews understood the danger that Zionism posed to their political, social and economic status. Those Jews who did leave the country generally settled in Europe, India, Iran and North America - as well as Palestine.

By 1947, however, Iraqi Jews found themselves in an increasingly untenable position. The aggressive activities of the Zionist movement, followed by the birth of Israel, led many Arabs to associate all Jews with Zionism. At the same time, nationalism was on the rise in Iraq, marked by a distinct anti-Zionism.

The question of the fate of Iraqi Jewry came up repeatedly in meetings of the Israeli cabinet, most often on ShitreetÌs initiative In September 1949, for example, Shitreet proposed a "transfer" of Palestinian refugees and Iraqi Jews. Sharett and Prime Minister David Ben-Gurion were unwilling to discuss the idea, and dismissed Shitreet reproachfully.

In mid-October 1949, the Israeli press began reporting that Iraq was willing to agree to a transfer, and there was evidence that senior Iraqi officials supported such a move. But Ben-Gurion and Sharett chose to ignore these signals, and despite Israel's professed interest in absorbing Iraqi Jews, the two leaders adopted an intransigent position. Ben-Gurion told the cabinet that "all this talk about exchange seems very curious to me. Clearly, if the Iraqi Jews could get out, we would never think about asking for any type of exchange, whether of persons or of property!"

Ben-Gurion and Sharett were well aware of the hefty price Iraq would demand for concluding any concrete agreement. Israel would have to either repatriate the Palestinian refugees or compensate them.

In March 1950, the Iraqi government passed a bill allowing Jews to renounce their Iraqi citizenship, and to leave the country. Known as the de-nationalisation law, it was to remain in effect for one year and carried no stipulation about property.

A month after passage of this bill, Israel made its first attempt to recover Jewish assets from Iraq. The Government was willing to examine the possibility of exchanging Arab property in Israel which has not been abandoned for the property of Jews in Iraq. The investigation, it was stressed, relates only to Iraq and not to any other Arab country, and only to property which has not been abandoned."

The plan proposed by Ben-Gurion and Sharett called for nothing less than the deliberate transfer of Israeli Arabs. Lief, the adviser for land and border affairs at the Prime MinisterÌs Office, had already begun to implement it. According to Uzi Benziman and Atallah Mansour, in their book, "subtenants," Leif wrote to the prime minister, the foreign minister and the treasury minister that "as a first measure, I would instruct our representatives in Paris to establish contact with members of the Iraqi Jewish community in order to convince them to cease selling their assets at reduced prices, and to signal that there is a chance they will be able to obtain a higher price on the basis of mutuality."

All efforts at mediation failed, however, and the assets of Iraqi Jewry were never brought to Israel. Nor did anything ever come of the transfer plan.

In 1951, Zionist activists were hard at work in Iraq. Some 35,000 Jews had already departed, and another 105,000 were registered to leave. Delays in the operation were caused not by Iraq but by Israel, and specifically by the quota system then applied by the Jewish Agency. On March 10 of that year, Iraq's prime minister proposed a bill at freezing the assets of all Jews who had renounced their citizenship. In order to prevent last-minute transactions, the Iraqi treasury ordered the banks to close in the three days before the law took effect. Jewish homes were searched, their stores were closed and their cars and property impounded.

Sharett asked his fellow cabinet members to consider Israel's response to the Iraqi actions. "The question arises as to what, exactly, we can do. Appeals can be sent to Britain and the United States, of course ..... I assume that they will refuse to intercede ..... They can say "you took the property of the Arabs who left Israel, you gave the property to the Trusteeship. The Iraqis are doing the same thing..."

In the same discussion, Sharett reported that some Iraqi Jews in Israel were calling on the government to impound Arab assets in Israel and distribute them to the Iraqi Jews. The majority of the cabinet agreed that the transfer of Arab assets to Iraqi Jews was not feasible.

In its place, Sharett proposed an alternative. "We declare that the entire subject of Iraqi Jewish assets will be taken into consideration in the final settlement, in determining compensation for the Palestinians," he explained. "Since we have yet to abandon the principle of paying compensation, we will now say that the value of the Iraqi assets will be deducted from them."

Inventive as it was, Sharett's idea did not satisfy Shitreet. He continued to press for a tangible measure to ease the Iraqis' plight. "The Iraqi Jews will come to the Foreign Ministry and .... they will not be content with empty words," he told Sharett. "There can be no doubt that their claim to Arab assets is well-founded. Their situation is the direct result of the creation of the state of Israel, and we have to consider a way of compensating them from the Arab assets.

Kaplan retorted that by the same token, it might be said that Israel should compensate every individual who comes here. Poland takes the Jews' money as well..."

The Knesset ultimately approved the government's position on the Iraqi situation, so that linkage between Iraqi Jewish property and Palestinian compensation became Israeli policy.

"By expropriating the assets of tens of thousands of Jews who immigrated to Israel," Sharett said in a speech before the Knesset on March 19, "the Iraqi government has incurred a debt to the state of Israel. Such a debt already exists between Israel and the Arab world, and that is the debt of compensation to those Arabs who left Israeli territory and abandoned their property..... The action now taken by the Iraqi kingdom..... compels us to link the two debts .... The value of the Iraqi Jewish assets that were expropriated will be taken into consideration when calculating the compensation we committed to pay Arabs who abandoned their property in Israel."

This decision to link the two "debts" treats Iraqi Jewish capital as a national rather than a personal possession. In essence, that capital was expropriated twice, once by Iraq and then by Israel. In a memorandum sent to the UN Palestine Conciliation Commission, the Foreign Ministry reaffirmed its commitment to compensating the Palestinians, but added that "we cannot fulfil this commitment if, in addition to bearing the burden of immigrant absorption, Israel must provide for the restitution of 100,000 Iraqi Jews. "In other words, had the Iraqi government not impounded Iraqi Jewish assets, Israel could have compensated the Palestinians.

During the debate that followed Sharett's speech, Knesset members took turns denouncing Baghdad's action. Many representatives likened it to steps taken by the Nazis. Meir Argov of Mapai said that "Israel had been willing to do its share for the refugees, but now, after this robbery of Iraqi Jews, Israel is released from its obligation."

Sharett's speech served to satisfy Iraqi Jews' demands for a concrete response to Baghdad, and kindled hopes for a speedy restitution. In a telegram to Israel, Zionist activists in Iraq wrote, "the Jews now believe that they have something to depend on... Jews whose assets have been frozen have approached us asking whether they will have to show proof of those assets once they arrive in Israel and, if so, how might such proof be conveyed. "Naim Sofer, chairman of the organisation "Movement of Iraqi and Eastern Jews in Israel," called on Israel to implement its decision immediately. His initiative clearly demonstrates the degree to which Iraqi Jews believed they would receive compensation from Arab assets held by the Trusteeship.

Sofer's letter served as a warning for the Foreign Ministry. While lower-level officials assured Sofer that "the fate of Iraqi Jewish assets is a constant concern for the government of Israel," the ministry's upper echelons were already acting to avert a catastrophe. "The frozen Iraqi Jewish assets may be registered," reported one Foreign Ministry memorandum to the Prime MinisterÌs Office, "but their sole purpose will be to deduct the value of those assets from the amount of compensation to be paid for the abandoned Arab assets." The memorandum added that the government could not compensate the Iraqi Jews "without opening the gates to a flood of private requests from tens of thousands of Arab refugees who once owned assets of one kind or another in Israel."

Though Sharett had always opposed the notion of transfer, the freezing of Iraqi Jewish assets offered him a golden opportunity to free Israel from Palestinian claims for compensation. And indeed, almost as soon as the 120,000 Iraqi Jews arrived in Israel, the government turned its back on them. The Foreign Ministry objected to the creation of a special office to oversee the registration of claims against Iraq for assets left behind. According to historian Moshe Gat, Sharett insisted that "the value of the Jewish assets impounded by Iraq would be tallied when the question of compensation comes up for discussion. That has yet to happen, and there is no telling when it will. The issue remains hypothetical."

Hypothetical though it was, the policy of linkage was twice put to the test. In 1955, a public committee was set up to register the claims of Iraqi Jewish immigrants. The committee completed its work in December 1956, and submitted its final report to the Foreign Ministry. There it remained, unattended. The reason for the ministry's inaction again was rooted in the linkage policy, as indicated by documents relating to the committee. As one internal memorandum advised, "It is recommended that we refrain, at least for the time being, from declaring that the purpose of the claims registration is to deduct the amount from that of the compensation for abandoned Arab assets."

The second test of the policy came in 1979, during peace talks between Israel and Egypt. Addressing the Knesset, Shlomo Hillel asked Prime Minister Menachem Begin about compensation for Iraqi Jews. "The problem of Jewish property that was stolen by Arab countries - and not just one Arab country - was raised and will be raised in all our discussions, "Hillel quotes Begin as saying. "It was raised and will be raised in all our discussions with Egypt. That is why we agreed to create a committee to consider the claims of all parties. When the right day comes, we will submit our claims for assets seized illegally."

The peace treaty with Egypt was signed, but no action was ever taken on the Iraqi assets. Though it had linked the two claims, Israel never offered compensation to either the Palestinians or the Iraqi Jews. The linkage policy represents an historic milestone for Israel and its attitude towards both the Palestinian refugees and the Iraqi Jewish community. After their expropriation by the Iraqi government, Jewish assets were then nationalised by the state of Israel. Proof of that nationalisation can be found in the Israel State Archives, in the files labelled "Defence of Israeli Assets." Once it had claimed those assets as its own, Israel could put them to any use - rhetorical symbolic, or legal - it chose.

During the 1948 war, many Arab assets were either abandoned or seized. The value of these assets has never been determined, but is probably in excess of $5 billion. Israel, however, remains opposed to paying that compensation as long as Jewish claims against Arab states remain unsettled. The linkage policy stands unchallenged.

The linkage between Palestinian and Iraqi Jewish claims grew out of the cynical Israeli belief that Arab and Jewish interests are inherently irreconcilable. In looking for the roots of the antipathy between the Arabs and the Jews from Muslim countries - an immense topic that lies outside the scope of this article - one cannot ignore the way in which the Zionist movement and later the Israeli government helped spawn those tensions.

From Ha'aretz Magazine. April 10, 1998

Scribe: The Israeli Government has explained its position concerning Jewish assets in Iraq, of not compensating Iraqi Jews out of the frozen Palestinian assets, by saying that the State of Israel spent billions in resettling Iraqi immigrants in Israel. WOJAC was just a camouflage.

What about the assets of Iraqi Jews who did not go to Israel?