Cash-loaded Gulf goes shopping, buys American assets

(Hat tip-Margo I.)

Wilf Dinnick

March 21, 2008 CNN
SPENDING SPREE: CEO Mubadala Development Company Khaldoon Mubarak claims their buying is commercially driven.

Dubai: The American economy may be in the midst of a financial crisis, but in the Middle East, oil-rich states are flush with cash. To them, American investments are seen as a bargain and they’re going on a spending spree. Many Middle East countries are snapping up American assets and even bailing out their banks. But does all this money come with a hidden agenda?


A part of super wealthy Emirates of the Gulf is being spent on lavish construction projects.


As the US economy stumbles, the sovereign wealth funds of the Gulf have set their sights on a chunk of corporate America. According to an estimate, the Abu Dhabi Investment Authority (ADIA) is worth close to $ 900 billion.


“They don’t feel they need to provide transparency in their dealings. The culture is one of person-to-person contact,” says Virginia Congressman Jim Moran.


ADIA owns five per cent of America’s largest bank and a piece of the Toll Brothers, which is one of America’s biggest homebuilders.


Neighbouring Dubai has three funds, one of which owns 6.5 per cent of MGM Mirage. Qatar grabbed nearly two per cent of Credit Suisse as the bank laboured amid the credit crunch.


“Three trillion dollars that figure can double in the next few years,” says the Editor of business and finance newsletter, RiskWire, Alasdair Ross.


Most of the Gulf’s fund managers are media shy. They rarely talk to the press and answer questions.


Privately they say they are actually doing a service by pumping money into the faltering US economy. And in many cases, troubled banks came to them for cash injections.


But could these Middle East funds eventually leverage their financial position for political gain? One Abu Dhabi fund executive tells CNN: “They don’t want to run companies, they are simply after profit.”


“We are building partnerships all over the world. Partnerships built on the right platforms. We are commercially driven,” CEO Mubadala Development Company Khaldoon Mubarak says.


Congress is investigating, and looking to create guidelines for investing, and so is the European union. Abu Dhabi is now on a rare PR offensive. A letter to Treasury Secretary — printed in the Wall Street Journal — promises: “Abu Dhabi government has never and will never use its investment organizations as a foreign policy tool.


The one thing for sure is that with high oil prices these sovereign funds will have plenty of cash, and plenty of opportunities to invest in companies looking for money.


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