Monday, December 26, 2016


The Siege  and Destruction of Jerusalem, by David Roberts
Notwithstanding the 500,000 dead in the Syrian Civil War, the existential threats posed to the region by ISIS, and finally, an ascendant Iran, seeking to displace Saudi leadership, the recent focus on Israel, and the expected American response, after the new administration takes office, could result in open anti-American actions, manifesting itself in public protest, with unofficial government support, which might result in a major increase in risk in the Middle East.

The expected movement of the American Embassy to Jerusalem, which is pursuant to an American law passed in 1995, but ignored by previous American presidents, for the purposes of catering to the oil-rich countries of the region, is likely to occur.* Although the Government of the State of Israel has repeatedly advised, as a matter of national policy, that it does not intend to relinquish the Old City of Jerusalem, or any part thereof, you can expect virulent protests, no matter where the new US Embassy is situated, even if it is in West Jerusalem, which has been in Israeli hands since 1948.

When the Old City was annexed to Jordan, during the period between 1948 and 1967, both Christians and Jews were prevented from access to their holy sites, so do not expect Israel to withdraw from any part of it. The embassy move could even trigger armed action against Israel, by its neighbors, if you are to believe some of the propaganda being published, notwithstanding that ISIS is the primary threat for 2017 and beyond.

One should expect widespread Arab outcry, through the Middle East, and since America is regarded as an ally, US financial institutions, as well as bank clients with exposure in, or doing business with, the countries of the region, should be alert for any erupting violent protest movements, which could damage American assets, injure local agents or representatives, or disrupt financial services to the extent that normal commerce, including repayment of debt, or ongoing transactions, might be disrupted.

Therefore, it might be prudent to, early on, examine any outstanding client receivables, or pending transactions, of both the banks and any of its major clients with exposure there. Such an audit should not only be complete before January 20, but any remedies planned should be executed by that date, lest there be an immediate demonstration of the new American administration's likely "big stick" foreign policy measures. Raising Country Risk, for the countries that are most likely to see an adverse response to the embassy move, orchestrated by government, should be seriously considered at this time.
* The United Nations proposal, for a partition of the British Mandate into Arab state, a Jewish state, and an international zone for Jerusalem, was never approved and implemented, because the Arab countries bordering the new State of Israel declined, and thereafter invaded it. The United States later withdrew its approval of any international status for Jerusalem, and the United Nations' utter failure to act as a peacekeeper since 1950, in a world often at war, means that such a plan could never be successful. Jerusalem has never been the capital of any country, other than the Jewish nation, in its 3000 year history; while under Ottoman, and muslim, control, it never served as a capital city, and Arab claims have no legal or historical basis.



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