Loans Affair - The Loan

The Loan

During 1975, the Whitlam Government attempted to raise a loan of approximately US$4 billion. The money was intended to be used to fund a number of natural resource and energy projects, including construction of a natural gas pipeline, the electrification of interstate railways and a uranium enrichment plant.

Tirath Khemlani (1920 - 1991) played a pivotal role. He was employed by Dalamal and Sons, a London-based commodity-trading firm

The raising of foreign loans for the Australian Government at the time required the authorisation by the Loans Council. It was common knowledge that funds were usually borrowed from European banks or financiers. Connor's attempt to secure the loan was unusual for several reasons:

1. The size of the loan was extremely large for the time.
2. When a project of this scale and cost is undertaken, governments often attract foreign investment and ultimately form a business partnership, whereby the foreign investor would retain partial ownership and/or rights over the resources once the project is complete. However, this option was rejected by Connor who was renowned for his desire to have Australian resources controlled and owned by Australians.
3. The Minister for Minerals and Energy was raising the loan independent of Treasury.
4. Rather than attempting to raise the loan from US financiers, Connor attempted to raise the loan from Arab financiers, with Khemlani acting as the intermediary. There are unconfirmed reports that Arab financiers offered lower interest rates on governmental loans than US Banks/financiers. The Middle East at the time was awash with "petro-dollars", as the price of oil quadrupled between 1973 and 1974

Connor was duly authorised to raise loans through Khemlani in late 1974. Between December 1974 and May 1975, Khemlani sent regular telexes to Connor advising that he was close to securing the loan.

However, the loan never eventuated and, in May 1975, Whitlam sought to secure the loan through a major US investment bank (name undisclosed). As part of the loan procedure, this bank imposed an obligation on the Australian Government to cease all other loan raising activities pertaining to this loan and accordingly, on 20 May 1975, Connor's loan-raising authority was formally revoked.