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Western corporations looking for business opportunities in the Middle East as well as Middle Eastern groups looking for opportunities in the United States or worldwide are interested in the role of U.S. banks in this market. A natural link between various capital markets is provided by U.S. banks as they strive to create imaginative financing ideas. One might well say that nobody has a monopoly on creativity; however, because of the important role of the U.S. dollar in international trade and finance and the worldwide focus on New York capital and financial markets, I believe U.S. bankers have a decided advantage. Fluctuating interest rates and volatile exchange markets intensify the competitive environment and make it necessary to keep on top of market developments.

A brief historical survey is perhaps in order. Although the most dramatic developments in finance in the Middle East have happened in the last 25 years, the association of U.S. banking with the area dates back to the last century. The forbear of Morgan Guaranty developed its first clients in Egypt as early as 1898; it went to Turkey at the turn of the century; and it established formal relationships in Saudi Arabia in the mid-1930s. It has built substantially onto this base in all other countries of the region during the last 50 years. Looking back, the objectives set in those early days were not really very different from those of today. The bank wanted to be present in a developing area, to help with the financing of new projects and assist in the development of local capital markets.

A major significant event for the area and the world took place in 1973 with the first round of substantial oil-price increases, to be followed by a second round a few years later. The local markets experienced explosive...