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. Last Updated: 07/27/2016

Mideast Says No to U.S. Goods

DUBAI, United Arab Emirates -- Zamzam Cola has new customers in the Gulf and plans to soon expand into more Arab markets. The Iranian company can indirectly thank Israel for its growth.

Zamzam -- which previously exported only to Iraq and Afghanistan -- is benefiting from a grass-roots campaign by Arabs and Muslims to boycott American goods as a way to punish the United States for its backing of Israel. Set off by the latest Palestinian uprising, the boycott is especially directed at well-known American products like Coca Cola and McDonald's.

"After Arab countries in the region started boycotting some American goods, including Coca Cola, demand for Zamzam began," said Bahram Kheiri, the Iranian beverage company's director.

He wouldn't give sales figures, but said Zamzam has started exporting to Bahrain and is discussing orders with "about 50 big companies" in the United Arab Emirates, Kuwait, Saudi Arabia, Syria, Lebanon, Jordan, Egypt and Indonesia. Zamzam is sweeter than Coke and has a built-in appeal for Muslims because it takes its name from a holy spring in Saudi Arabia.

The boycott is being urged across the Middle East and North Africa by Muslim preachers, students, intellectuals and -- in Saudi Arabia, a main U.S. ally -- even some advisers to the Saudi king. The appeal is delivered in mosque sermons, leaflets and Internet sites.

It's difficult to say how hard American companies are being hit by the boycott -- and how much of the economic pain is inflicted on Arab businesses selling U.S. products. Of the six McDonald's franchises in Jordan, two have closed for lack of business, one in the capital Amman and one near a Palestinian refugee camp. In Morocco, a government official who asked not to be identified estimated sales of Coca Cola could fall by half in the country's north, a base for Islamic groups. In the United Arab Emirates, sales of the local Star Cola are up by 40 percent in the past three months.

In Dubai, business appears to be down at U.S. fast food chains like McDonald's, KFC and Hardee's, and up at local restaurants. In Saudi Arabia -- in a sign of concern at the boycott's effect -- prices have been cut up to 50 percent on some U.S. imports and ads for fast food franchises point out they are Arab owned and managed.

Respected Muslim cleric Sheik Youssef al-Qaradawi issued a religious ruling in the Gulf state of Qatar saying American products should be viewed like Israeli products -- which have long been banned in the Arab world. In Riyadh, Saudi Arabia, mosque preacher Sheik Omar bin Saeed al-Badna argued the boycott would be good for the kingdom's economy.

"Boycotting American food and drinks means more business for Saudi, Lebanese and other restaurants, as well as local producers of soft drinks. This will be good for the majority of Saudis," he said.

However, the boycott's effect is not that simple, economists and government officials say. They say the action against American products harms local business, franchisees and employees -- but has little impact on mother companies in the United States.

"Most of the companies that people consider American are multinational and those who own them are Arabs," said economist Suleiman al-Mazrouei of Emirates International Bank.

Coca Cola officials said Coke's Middle East operations are run by Arab workers and executives and get materials from local suppliers.

"We, for example, have a bottling partner in the Palestinian Authority area which employs about 320 people. So we are one of the largest employers in the Palestinian Authority area," said Steve LeRoy, Coke's communications director for Central Europe, Eurasia and the Middle East.

LeRoy said Coke was affected by the boycott, but refused to say how much. The international headquarters of McDonald's and Hardee's did not respond to repeated requests for comment.

The boycott is not related to the Arab League boycott of companies that do business with Israel, which has largely ended. U.S. laws ban Americans from obeying the Arab League boycott, but no similar measure covers the grass-roots campaign against U.S. products.