End to Nazi loot saga

If it has taken six years for the Clinton administration to realise economic sanctions against other nations generally do not work, the timing of the Pauline conversion cannot have been more ironic.

It was reported last week that the White House and key members of Congress had concluded that sanctions - a key weapon of US foreign policy - were not really working, and that new strategies would have to be employed in the course of Washington trying to influence world events.

They were not working in changing the attitude of rogue nations such as Burma, Iran or North Korea, and when they did have the desired effect - such as strangling foreign investment in Cuba - the anger they provoked among overseas allies made them hardly worth it. As for China, well, not a year goes by without the improving Sino-US relationship being threatened with derailment by some knee-jerk sanctions legislation being proposed on Capitol Hill.

But in the same week Washington began to rethink its philosophy on sanctions, an historic agreement on the bitterly contested issue of the reparation of Holocaust survivors' assets was announced outside a Brooklyn courthouse. The two major Swiss commercial banks reached a US$1.25 billion (HK$9.66 billion) settlement in a class action lawsuit filed by survivors as compensation for deposits which were not returned after World War II and for the gold looted from Jewish victims by the Nazis and laundered through Switzerland.

While the plaintiffs - and the world's Jewish community - celebrated the agreement, Washington privately breathed a sigh of relief that the three-year saga, which had soured relations with Bern, appeared to be over. But this was one case in which the threat of economic sanctions against Swiss companies finally pushed the two banks, Credit Suisse and Union Bank, into doing a deal.

Washington was, for once, nowhere to be seen. Frustrated with foot-dragging by the banks and Swiss authorities, a group of cities and states, including California, New York and Pennsylvania, had either instituted or threatened to introduce sanctions banning business with Swiss financial institutions. Things looked bad when the two banks offered a US$600 million settlement in June, only to have it rejected. With the deadline approaching on the sanctions threat, they agreed to pay US$1.25 billion, in return for the dropping of other class action suits against Switzerland's central bank.

The states and cities may not have had the State Department's blessing for weighing in, but their contribution finally looks like getting some survivors - average age, 81 - some small compensation while they are still alive.