How Israeli lobby arm-twisted US county to drop anti-investment proposal

Residents of a little-known county in the United States are experiencing the true extent of power that the Israeli lobby wields in the world’s oldest existing democracy.

All that these residents did last month was introduce a resolution in the council of Cuyahoga County—a municipality of 1.2 million people in northeast Ohio—that called for an end to any “additional” investment in Israel Bonds.

Israel Bonds is a corporation that raises money globally for the Israeli state that’s been on a borrowing spree to fund its $67 billion war in Gaza, in which nearly 39,000 Palestinians have died since October.

Within days, the Israeli lobby came down hard on the backers of the seemingly mundane municipality-level resolution, which wouldn’t even be binding on the treasury managers had it been approved by the council’s committee of the whole.

Dave Yost, the attorney general for the state of Ohio, intervened to strictly warn the county leadership against passing the resolution. The county leadership caved immediately. Not only did it withdraw the resolution, but it also changed the rules for public participation in future council meetings to minimise citizen backlash.

Cuyahoga County has invested $16 million in Israeli bonds so far. The current stock of Israeli bonds would have remained unaffected even if the proposed resolution had passed and been acted upon by the county.

Meanwhile, local activists say discrimination and acts of bigotry against pro-Palestine activists have increased significantly in Cuyahoga County, which includes the city of Cleveland, which hosts the seventh-largest Palestinian community in the US.

“The perception from our end is 100 percent that [the intervention from the Ohio attorney general] was personal and a misuse of his office to make changes that he personally wants to see,” says Dr Shereen Naser, a university professor who’s taking an active part in mobilising the community against the use of US taxpayer dollars to fund Israel’s war.

Speaking to TRT World, Dr Naser says that Ohio treasurer Robert Sprague is “directly involved” with Israel Bonds.

Last December, the Ohio treasurer formally joined the Government, Industry, and Financial Services Leadership Group set up by Israel Bonds. The Israeli corporation has established the forum in the US ostensibly to grow its “governmental relationships”.

“We know that at the state level, there’s this nepotism between Israel Bonds and our officials,” she says.

How Israel Bonds works

Israel has been borrowing money from global investors through these bonds for the last 70 years. With the onset of the war in Gaza, however, Israel Bonds has redoubled its efforts to raise funds globally to replenish Tel Aviv’s war chest.

One-quarter of all foreign debt that Israel raised in 2023 was mobilised through Israel Bonds. Since October, the corporation has sold bonds worth $3 billion, about three times higher than its annual average.

The marketing material of the corporation appeals to the Zionist sentiments of potential investors: “Israel is at war. We stand with Israel. Make a statement, Invest in Israel Bonds,” the website’s banner screams in bold letters.

Analysts have attributed Israel's unusually high level of borrowing to its increased military spending. This has widened the gap between its revenue and expenditures to seven percent of GDP, higher than the 6.6 percent target.

Yet war hysteria created by Israel has led at least 35 US states and many small municipalities to invest more than $1.7 billion into the debt instrument since October.

With $262.5 million, the state of Ohio is one of the largest holders of Israel Bonds within the US.

The investment figure by US state and local governments is unusual as big investors typically view held-to-maturity bonds unfavourably. Unlike most other dollar-denominated debt instruments, which can easily be cashed at any time, bonds sold by this corporation aren’t traded in a secondary market and must be held to maturity—a feature that makes them more suitable for the needs of the Jewish retail clientele.

That’s why it’s common practice for family elders in Jewish households in the US to buy long-term Israel Bonds for their young family members as gifts for Bar and Bat Mitzvah—the coming-of-age ceremony for Jewish boys and girls when they reach 12 or 13.

The absence of a secondary market means municipality funds invested in Israel Bonds remain stuck in low-yield instruments for years on end, even if better investment options emerge later.

Dr Naser says she learned through a public record request that the Ohio state treasurer was supposed to be the keynote speaker at a gala Israel Bonds was throwing to solicit more funding.

“We’re well aware of that connection. I imagine there’re other connections we’re not aware of, including with our attorney general,” she adds.

In the same vein, she says the county executives making decisions about the $1.1 billion investment portfolio have made trips to Israel in the recent past, which gives further credence to the claim about the hand-in-glove nature of US municipal officials with Israel Bonds.

‘A toothless resolution’

The county law says the amount invested in foreign debt must never exceed two percent of the total investment portfolio. Holdings of Cuyahoga County in Israel Bonds were worth $6 million before the start of the war last October. This was about 0.5 percent of the county’s total investment portfolio of $1.2 billion at the time.

But the county officials took it upon themselves to increase the share of Israel Bonds in the portfolio following the October war in an apparent bid to burnish their Zionist credentials. Within months, they ploughed another $10 million of taxpayer money into Israel Bonds, taking its exposure to $16 million or 1.3 percent of the portfolio by the end of June.

“They've been all in, despite the (death) numbers from the genocide,” says Dr Naser.

The overenthusiasm displayed by county officials for Israeli bonds made little financial sense given Israel’s credit-worthiness, which suffered immensely under the prevailing political, economic and fiscal conditions in Tel Aviv.

Moreover, Israel’s real GDP growth rate slowed down significantly from 9.3 percent in 2021 to 6.5 percent in 2022 and then to just two percent in 2023. A slowdown in the economic growth rate is generally taken as a sign of lower tax revenue collection in the coming months and years—something that’s bound to affect the country’s debt repayment capacity.

Against this background, a group of conscientious residents of Cuyahoga County decided to raise their objection to Israeli bond investments at the legislative forum.

Speaking to TRT World, activist Mohammad Faraj said some residents considered the proposed resolution “toothless”.

It only “urged” officials, including the treasurer and the county executive who enjoy full discretion over these investment decisions, to refrain from future purchases without touching the existing stock of $16 million Israeli bonds.

“It's our feeling that if the resolution had passed in the form that it was [presented], it wasn’t anything that could be ignored in good faith,” says Faraj, who has been leading the way with the No More Bonds campaign in Ohio at both county and state levels.

He says a resolution submitted to the legislative body is “hard to ignore” and that the immediate reaction from Ohio state officials provides “legitimacy” to his argument.

After all, the letter from Ohio Attorney General David Yost, seen by TRT World, sternly cautioned Cuyahoga County Executive Chris Ronayne against “divestiture of assets” held in Israel-linked corporations like Israel Bonds, saying that doing so would be a violation of Ohio law.

“Once the state has spoken on an issue, as it has here, cities and counties cannot refuse to follow its direction. Ohio stands with Israel. Cuyahoga County should do the same,” Yost wrote in the letter last month.

In a lengthy response to the attorney general’s letter, the No More Bonds coalition said the “timing and temperament” of the letter by the Ohio attorney general amounted to “unwarranted and uninformed bullying”.

“You’re interfering in perfectly proper local legislative deliberations. The Cuyahoga County Council possesses powers and discretion which you cannot control. Thousands of citizens ask that you please cease interfering in local democracy in Cuyahoga County,” it said.

Faraj says Israel Bonds constitutes a “bad investment” because it must be held for years until it matures. The resolution only sought to cease further buying of all foreign securities, including Israel Bonds, something the coalition’s lawyers consider “wholly lawful”.

Investing on a political basis

Israel Bonds is one of the few international investment avenues in which US laws allow local governments to take exposure. However, the permissibility rests strictly on the local governments making investment decisions based on financial factors alone.

“There’re financial and economic aspects as well. Israeli bonds are very risky investments now, considering the state of the Israeli economy,” Faraj says.

However, investing municipal funds to support a country at war is a political, non-financial decision that violates Ohio statutes in no uncertain terms.

The state’s investment policy “expressly prohibits” the treasurer from “investing in a security or asset based on non-financial factors”.

Yet the treasurer violated the state’s investment policy by investing in Israel Bonds for explicitly political reasons. He even declared in his latest annual report that the state’s purchase of $20 million in Israeli bonds, announced on October 11, was meant to provide “support to the State of Israel in its defence against terrorism”.

Treasurer Sprague went on to express hope that the investment would “provide desperately needed liquidity to Israel” as it wages a genocidal war in Gaza.

Faraj says the coalition of activists demanding US taxpayer dollars be kept away from the blood-thirsty Israeli government is gathering strength across county, state and national levels.

“We're slowly leading to that point of exploring what our legal options are,” he says, noting that going for litigation to challenge these investments is currently under consideration.