I have been working on the history of the Lebanon business class, especially their modes of intervention in politics, in numerous ways. Much of my research on Lebanon’s economic and social history has gone into my book The History of Modern Lebanon (London, Pluto: 2007). Two other works have been also intimately linked to this project: i) a book on the family papers of Suleiman Traboulsi (+1934 ), a rural notable and his family in a town in the Western Biqa` (Ya Qamar Machghara, Beirut, Riad El-Rayyess Books, 2005) and the edition of `Issa Iskandar al-Ma`louf’s (1873-1956) voluminous genealogy of the families of the Arab East of which the first part on the families of Lebanon has just come out (Tarikh al-`Usar Sharqiyyah, seven volumes, Riad el-Rayess Books, 2008). The latter book contains valuable material of a big number of Lebanon’s business families up to the forties of last century.
The US department archives contains
- Pharaon-Chiha Bank:
The Pharaon-Chiha Bank, the first Lebanese owned bank that played a prominent role in grooming Bishara Khuri to power the first president of independent Lebanon. Khuri was the brother in law of Michel, one of the owners of the Bank and a major ideologue of the Lebanese class in his own capacity. Under Khuri’s regime the bank was financed the parliamentary elections, most of the House of Deputies were on its payroll, and the bank itself benefited in return from the largesses of the Khuri governments.
In the nineteenth century, developed in Beirut a financial, commercial and manufacturing bourgeoisie, compared to the oldest aristocratic families of Greek Orthodox and Sunni merchants and land owners of the Sursock quarter. The families of this new bourgeoisie were mainly Catholics of Syrian or Palestinian origin and of more recent arrival to the city. They were more closely related to European capital through the silk economy (exporters of raw silk, money-lenders to peasant producers and owners of silk reeling factories) the banking activities and the import of European manufactured products.
The two associated and related families, Pharaon and Chiha, were typical representatives of this new class. The Pharaon, an old Damascus family, were already established in the commerce of livestock and cereals between Damascus and Hawran at the beginning of the Ottoman era. By the end of the 17th C., branches of the family settled in the main urban centers of the empire -Cairo, Alexandria, Baghdad, Aleppo, Beirut and Zahla in addition to the European port cities that traded with the Levant such as Paris, Venice and Trieste. Their Egyptian branch flourished under the Mamluks. In 1784, Antoun Pharaon was appointed Master of the Egyptian Customs. Moneylender to the mamlûk chiefs, he soon opened a trading post in Trieste which attracted the deposits of rich Orientals. Upon his death, in 1805, Antoun Pharaon had been honored by the title of count by the Pope and his fortune estimated at three million French francs. Ilîas Hananiya Pharaon, master of the Alexandria Customs, financed Bonaparte’s Egyptian campaign and followed the French troops back to Paris where he was appointed to a high post in the Ministry of Foreign Affairs. After Napoleon’s defeat, he collaborated with the Restoration and earned the title of ‘count of Balbeck’ from Louis XVIII.
The Chihas were Chaldean catholic notables from Iraq who settled in Beirut, via Damascus, since the 18th C. They were allied to the Pharaons in marriage and associated in the silk business. In 1876, Antoine Chiha and his father-in-law Raphaël Pharaon invested big profits earned from speculation on raw silk in establishing a commercial and financial society that became the ‘Banque Pharaon-Chiha’, the first indigenous bank in Lebanon to extend credit to the silk economy, which was until then a monopoly of French financial houses.
On the eve of WWI, the Pharaon-Chiha association had invested in trade and industry and become the biggest silk reeling firm in the wilâya of Beirut, owning 10 of a total of 18 silk reeling manufactures with 520 basins, i.e. 75% of the total number of basins in the wilaya. (Ducousso, 1913). The company’s commercial branch controlled 12% of the total volume of silk exports from Beirut. Since 1894, it held a quasi-monopoly on the import of British coal (which had become the main energy source for the silk reeling firms), transported by their merchant ship, flying the English flag, and serving their warehouses in Mersine, Yâfa and Beirut.
Michel Chiha son of Antoun Chiha and Adele Pharaon, daughter of Rafael Pharaon was born in Bmikkin in the Aley district of Mount Lebanon in 1891. Left school early in his twenties to work with his maternal uncles in the family’s bank. Before reaching twenty he had become the director of the family bank, a post he will occupy untill his death in 1954.
The bank’s activities flourised under the French mandate. Its director was one of the rare Lebanese and Syrians to sit on the board of directors of the Banque de Syrie et du Liban (BSL).
At the same time as his maternal cousin and partner in the bank, real estates speculator and owner of one of the country’s largest import trading houses, held a substantial share in the French franchise company, the Compagnie du Port du Beyrouth and presided over its board of directors for many years.
Later on, the BPC was active in the gold trade of Beirut that rose in the thirties and expanded after the Second World War when Beirut became a major world entrepôt and transit market for the gold trade (the other trade centers being Kuwait and Tangiers) at least 20 per cent of the world gold trade was carried on in Beirut. In 1951the volume of its transactions shot up from 355 kilograms in 1946 to 89,293 kilograms. On that year, the trade reached its peak with a $100 million turnover. At least 75 per cent of this volume was for the transit trade. The rest went into stocking gold bullion in Lebanon to acjieved the gold coverage of the Lebanese Lira, a government decision (the law of 24 May 1949) taken upon the recommendation of no other than Chiha himself. An US embassy report from Beirut estimates the profits from that trade at $6 million annually and the number of Lebanese at all levels employed in it at that no more than 100.[1] In fact, a handful of bankers, rich merchants and rentiers controlled the trade and reaped the profits. Banque Pharaon-Chiha was one of those so was Hussein ‘Uwayni , who in his capacity as CEO of the Banque Indochine of Jiddah, ‘carried most of the gold transactions between the bank’s branch in Jiddah and the Beirut branch (Minor) and happened to be the finance minister who implemented the gold coverage of the Lebanese Lira.
BPC represented not only the financial power in the city but its political broker. Accused by Iskandar Riachi accuses of of appointing some ¾ of the parliament members and controlling a parliamentary bloc of 24 MPs who receive from the bank monthly allowances.
The Consortium, was the term coined by the satirical journalist Iskandar Riyachi in his Al-Sahafi al-Ta’ih (The Wandering Journalist) to describe the financial-commercial oligarchy that took over economic power in independent Lebanon. It formed a circle of some 30 families around a strong nucleus called ‘the President’s clique’ by Harold Minor, commercial attaché in the USA delegation. The said clique comprised Khuri’s brother Fu’ad, his son Khalil, Husayn `Uwaynî, Michel Doumit, de Freij, Shouqeir, Jean Fattal, the Kettaneh brothers, and the Pharaon-Chiha.[2]
The families of the oligarchy were mainly Christian: 24 Christian families (nine Maronites, seven Greek Catholic, one Latin, one Protestant, four Greek Orthodox and one Armenian), to six Muslim (four Sunni, one Shiite and one Druze). However, one of its Muslim members was Hussein `Uwayni, the richest and most important financial personality in the country in that period (estimated capital $15). `Uwayni, who had made a fortune in Saudi Arabia was the official representative of Saudi interests in Lebanon and a close aid and associate of Henri Busson, the French patron of the Banque de Syrie et du Liban (BSL) the currency-issuing bank that administered the State’s finances and controlled credit in addition to the foreign trade. Busson represented the continuation of French neo-colonial economic power in Syria and Lebanon.
Christian families of the oligarchy practiced extended endogamy in order to preserve, or increase, family wealth and property and advance business partnerships. In one generation, at least ten of the oligarchy’s families (Pharaon, Chiha, Khuri, Darwish-Haddad, de Feij, Kettaneh, `Arida, Bustrus, `Asayli, Doumit, Shuqayr) were associated by matrimonial bonds. To cite one example of these matrimonial associations, the five sisters of Michel Chiha’s were all married into the families of the consortium: Laure was the wife of Bishara Khuri; Mathilde of Georges Ibrahim Haddad; Marie of Wadi’ Ibrahim Haddad, Adele, of Farid ‘Abdallah Shuqair’ and Alice of Jean Moussa de Freige. Chiha’s two daughters were also married into families of the Consortium (Doumit and Hilu).
The capital of the oligarchy came from three main sources: i) the silk economy and the import trade during the Mutasarrifiya period (the autonomous zone of Mount Lebanon, 1861-1915); ii) war profits estimated at $100 million (between 1940 and 1944 allied troops alone spent £76 million in Syria and Lebanon); iii) emigrant money from Africa, the Americas and the oil-producing Arab countries (Iraq and Saudi Arabia especially).
The Consortium exercised extensive control over the country’s economy. In finance, the families owned a dozen local or mixed banks, headed by the BSL. Among them, Banque Misr-Syrie-Liban (one of the earliest Arab banks in Lebanon with Egyptian and Saudi capital), the Arab Bank, Banque Trad (Crédit Lyonnais), Banque Sabbagh (Banque d’Indochine), Banque Pharaon-Chiha, Banque Commerciale Italia (Sabbagh), Al-Bank Al-Ahli (main shareholders members of the Consortium: Youssef Salim, Antoun Sahnawi, Michel Doumit, Georges Karam, Najib Salha, Jean Fattal et Désiré Kettaneh), etc. The biggest insurance company, the Union Nationale, was also a partnership between members of the Consortium and French capital.
The above-mentioned interests were mainly importers of western manufactured products and controlled the biggest share of the market for food products, arms and ammunitions, agricultural and industrial equipment, beverages, medical and pharmaceutical products, construction material, electric equipment and telecommunication, stationery, wood, hardware, coffee, cars, spare parts, etc. Of the 50 agencies representing US firms, half were in the hands of one family, the Kettaneh, and the rest distributed among three of them: Fattal, Sahnawi and Pharaon.
The families of the Consortium were also pioneers in tourism and owned the country’s most luxurious hotels in Beirut (the St. Georges and Bristol hotels), the estivage centers of Bhamdoun and Sawfar and in the ski centers of Faraya and the Cedars. In the services sector, the Consortium, in association with French interests, controlled almost all of the franchise holding societies and public services companies: the port of Beirut, the water and electricity companies (Beirut, Qadisha, Nahr al-Barid), the Régie des tabacs et tombacs, etc.
The Consortium also controlled the biggest construction companies in the country (la Régie des travaux) and later, the C.A.T. of Emile Bustani, the biggest in the Middle East. The two principal air transport companies, Air Liban and Middle East Airlines, and the biggest land transport company were also owned by members of the oligarchy. In industry, the oligarchy controlled the main industrial firms in electricity, cement, textile, beer, matches, agricultural products, vegetable oil, paint, glass, etc. Last but not least, all the families mentioned held large holdings in real estate in both city and countryside.
The value of the fortunes of 15 of those families was estimated at 245 millions LL, the equivalent of nine times the State budget for 1944 and to more than 40% of the national revenue for 1948. A significant portion of those fortunes was invested overseas.
From the Consortium to politics
During the first independence regime of Bishara Khuri (1943–52), thirteen of the oligarchy’s members were elected deputies to parliament, five held cabinet posts and one was nominated prime minister (‘Uwayni himself). Most of these MPs were ‘deployed’ into the peripheries, particularly the Biqa‘ and the South, where they played the role of funders of the large electoral lists of the ‘political feudalists’. Under the Khuri regime, thirty-six deputies (of whom twenty-six were Christians) owned or were shareholders in the country’s biggest 230 firms.[3]
‘Uwayni himself was elected deputy for Beirut in the rigged elections of 25 May 1947, ‘Black May’, as they were called in reference to the role money and government coercion played in bringing to parliament a majority of MPs that supported Bishara al-Khuri’s claim for a new mandate and ensured his re-election for that new mandate two years later. The elections and the renewal of Khuri’s mandate added fuel to an already growing opposition led by Kamil Sham‘un and Kamal Junblatt, who accused the regime of corruption and speculation. ‘Uwayni himself voted for the constitutional amendment allowing the president a second term of office, and for Khuri’s new mandate.[4]
The year 1948 saw the beginning of ‘Uwayni’s executive career. He was appointed minister of finance in a new Sulh government; and on 24 February 1950 he succeeded Sulh at the head of new ‘neutral’ government of three ministers with Edouard Noun and Boulos Fayyad, charged with the supervision of new parliamentary elections and the drafting of a new electoral law. The law increased parliamentary seats from fifty-five to seventy-seven, and established the ratio between Christians and Muslims at forty-two Christians to thirty-five Muslims. The elections were considered fair, but the country had become severely divided between loyalists and oppositionists. ‘Uwayni was back in office from 14 February to 7 June 1951. Those were crucial times both for Lebanese economic and political life and for Lebanon’s place in regional and international politics following the Arab Nakba (‘catastrophe’) of 1948 and the creation of the state of Israel.
Economically, ‘Uwayni’s participation in Sulh’s governments and his leadership of two cabinets occurred against a background of major events: the liberalisation of exchange controls; the ongoing differences with Syria concerning the customs and the monetary union between the two countries and the management of the Common Interests dictated by the French mandate. ‘Uwayni participated in the major economic decisions and measures that led to the creation and consolidation of the ‘merchant republic’ with its service-based economy. As minister of finance, he was mainly responsible for the liberalisation of transactions and the adoption and application of Michel Chiha’s recommendation to link the Lebanese pound to the gold standard (24 May 1949). No doubt the measure also meant enormous profits for the small cartel of merchants and bankers who controlled the gold trade, prominent among whom were of course Chiha and ‘Uwayni themselves. Last but not least, ‘Uwayni, in both his capacities as prime minister and finance minister, was party to the long, difficult and stormy negotiations with his Syrian counterparts that eventually led to the breakup of the monetary union between the two countries in 1948 and the complete economic and customs divorce of 1950.
Looking at the events of those years from the perspective of Saudi–Lebanese relations, those last four years of Khuri’s term of office were exceptionally rich in interrelated events and developments: countering Hashemite designs and Western military pacts; the Tapline pipeline; and Husni al-Za‘im’s coup d’état and the execution of Anton Sa‘adeh.
III. Intra Bank:
The other important in Lebanon’s economic and political life is Intra bank founded and directed by the Palestinian Christian Yusuf Beidas who was granted important privileges by the Shihabi second bureau during the presidency of Fu’ad Shihab (1958-1964) and his successor Charles Hilu (1964-1970), in return for which the bank financed elections, and gave generous loans to loyalist politicians, including prime ministers, which were never recalled.
The bank krached under the impact of bitter fighting with its competitors.
Quote duweihi’s comments.
Abourish talks of a well-known Lebanese banker competitor of Intra who came regularly to the Bar since 1965 spreading rumors over Intra’s liquidity crisis. Kuwaiti ruler, major depositor, withdrew $5 million. Beidas delivered in cash in 36 hours. Embarrassed, Kuwaiti ruler returned money, Beidas refused to accept it (Said Abourish, Beirut Spy. The Saint George Bar, London, Bloomsbury 1990, p127-128). Other Kuwaitis in solidarity with their rulers pulled out their money. Abourish’s explanation for the krach “the Lebanese central bank, very much part of a conspiracy to rid the country of Palestinian commercial influence, refused to advance it funds. Intra Bank collapsed” (128)
Abourish goes on to relate that some of the Lebanese bankers who engineered Intra’s downfall met at the Bar to celebrate with champagne.
[1] ‘Beirut as a Gold Market’, American Embassy, Beirut, to the Department of State, Washington, Foreign Service of the United States of America (FSOUSA), despatch no. 515, 6 March 1953, unclassified.
[2] Data on the Consortium has been computed from a variety of sources, both written and oral. Among them should be cited two reports by the Foreign Service of the United States of America (FSOUSA) Declassified Material: i) Lane to Department of State: Memorandum of an interview with Prime Minister of Lebanon prepared by the Commercial attache,no. 1048, secret, Beirut, 17 December 1945; ii) The Political Control Exercised by the Commercial Class in Lebanon, dispatch no. 372, 21 January 1952, by Harold B. Minor. Minor’s exceptional report is based on information supplied by a number of Lebanese and foreign businessmen, politicians and high state functionaries. It contains information on 25 members of the ‘commercial class’.
[3] See Fawwaz Traboulsi, A History of Modern Lebanon, London: Pluto Press, 2007, pp. 115–19.
[4] Khuri himself had confessed that the elections were rigged. See Bishara al-Khuri, Majmu‘at khutab, September 1943–December 1951, 2nd edn, Beirut: al-Dar al-Lubnaniyyah li-l-Nash al-Jami‘i, 1983.