WEST GERMANY INVADES THE MIDEAST

An Army of Salesmen Go Wnere Conquerors Failed

THE historic Berlin-to-Baghdad ambitions of the Germans got nowhere politically under the whip of Kaiser or Fuhrer, but before the peaceful push of West Germany's prosperous economy, they are succeeding surprisingly well. Armed now with sample case and blueprints instead of howitzer and battle plans, West Germany's businessmen are aggressively pushing ahead with a more realistic version of the old "Drive to the East." In Beirut last week the beaming manager of the local Volkswagen agency had only one complaint: he could not get cars shipped in from Germany fast enough to meet Lebanese demand. In northeast Iran 250 West German engineers and technicians roamed the hills busily drawing up plans for factories, power plants and municipal water systems.

Even a decade ago, so successful a Drang nach Osten seemed hardly possible, for twice in 30 years calamitous wars wiped out Germany's stake in the lands curving about the eastern end of the Mediterranean. Yet in ten years, West German exports to Greece, Turkey and the Middle East have jumped from less than $10 million a year to $500 million.

In overall sales, West Germany's peaceful invasion force --some 500 German businessmen operate out of Cairo alone --has yet to catch up with Britain and the U.S. But in three lucrative markets--Iran, Syria and Greece--West Germany outsells any other nation. In Egypt and Israel the West Germans are now No. 2 in sales.

"They Like It." West Germany's success story owes most to the skill of its technicians and the acumen of its businessmen. But the German tradition of high quality has also gained from the shoddiness of some postwar U.S. products and from the fact that Russia's achievements in rocketry have created doubts about U.S. technological preeminence. German traders have also won an enviable reputation for fast delivery. Last summer when Saudi Arabia's King Saud decided he needed a three-truck caravan (sleeper with bath, dining car with throne, and a supply van), British and French firms told him he would have to wait six months. West Germany's Daimler-Benz, teaming up with a specialty body firm, did the job in seven weeks.

After delivery, most German firms guarantee prompt, expert maintenance--wherever possible by local workmen trained by Germans. Says an official of Munich's Siemens & Halske electric company: "Nationalistic Middle East governments like it when they find that in dealing with Siemens they are dealing with a nearly all-Arab group."

"A Good War Record." West Germans also enjoy two other competitive advantages. One is the aggressive trade policies of their own government. To help foster West German exports, the Federal Republic sponsors an insurance organization called Hermes, which offers exporters a guarantee against default by their customers. Thanks to Hermes (which has so far committed $600 million to underwriting Mideastern deals alone), West German businessmen can often offer credit to customers whom other Western businessmen must pass up as bad risks. Sometimes the Bonn government steps in directly to help. West Germany is about to give the Greek government $150 million in loans and credits, in a deal which commits Greece to spend two-thirds of it on German capital goods.

Germany gains from never having had colonies in the Mideast and, by shunning long-term investments in the area, West German businessmen continue to avoid the dread label "imperialist." Fury over British policy in Cyprus helped wipe out Gfeek memories of the harsh World War II German occupation, has played a big part in the Greek choice of West Germany as its new economic mentor. In Arab countries, the Suez invasion gave German traders a big edge over the British and French. "And why not?" asks one West German businessman. "We have clean hands."

Germany's own past, clean and otherwise, is put to advantage. As reparations for Nazi atrocities against the Jews, West Germany has paid Israel $460 million, much of it in capital goods, thus committing Israeli industries to German machines, raw materials and spare parts. At the same time, many Arabs think of the Nazis as the first and most successful anti-Israelis. "I'm embarrassed sometimes," says a West German businessman, "when an Arab says 'Heil Hitler!' to me." A less sensitive colleague admits that he prefers his Mideastern salesmen to be men "with good war records" --ideally, former members of Rommel's Afrika Korps.

"Stop the Nonsense." Having elbowed its own way in, West Germany now finds a newcomer using the same tactics as it did. Soviet-bloc nations are muscling in on the Middle East, particularly in the field of heavy construction, where the West Germans previously had a clear lead. Last December, despite the fact that West German experts were the first to make technical studies of the proposed Aswan High Dam, Nasser's United Arab Republic, in accepting Russian financial help, pledged itself to give Russia exclusively the first five years' construction work. This month Russia grabbed off 20 choice, long-term industrial projects in Iraq.

As Soviet success in Iraq demonstrates, the Communists often benefit even more than the Germans from Mideastern hatred for the "imperialist powers." Communist states are also prepared to underwrite prestigious but unprofitable deals. In Cairo last summer, when a West German firm desperately sought to win an electrical construction contract away from the East Germans, the East German representative impatiently burst out: "Gentlemen, let's stop this nonsense. I have orders from my home office to undercut any Western price--even if I have to go to practically zero."

Where the West German businessmen must generally charge 8% interest on credits, the Communists frequently charge as little as 2 1/2%. This is not philanthropy: in every such bargain there is a concealed political string. To pay for Communist arms and aid, Egypt's Nasser has mortgaged much of his cotton crop for years ahead. By reselling this cotton at cut prices to Western textile manufacturers (including West Germans), the Communists have driven Egyptian cotton exporters out of much of the European market, have thus deprived Egypt of a major source of foreign exchange and reduced her ability to import Western goods. In the first half of 1958, Soviet-bloc exports to Egypt were more than 2 1/2 times West Germany's.

No Halt. Worrisome as it is, the Communist trade offensive has not discouraged West Germany's own drive to the East. Partly because of the poor quality of 30 locomotives which Nasser bought from Communist Hungary two years ago, partly by agreeing to accept some of the price in cotton instead of cash, West Germany's Henschel Works fortnight ago snatched an Egyptian State Railways order for 108 diesel-electric locomotives away from both Russian and U.S. bidders. And in the Ruhr several major industrial firms are mulling over plans for a "Mideast pool" which would merge their commercial influence and intelligence services in a single network of "contact offices." Aware that such devices make West Germany best able of all Western nations to match the techniques of Soviet state capitalism in the Middle East, West Germany's canny traders expect to go on giving the Soviet-bloc nations a hard run for their money --and Western competitors an even harder run for theirs.

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