Tag Archives: Qatar Investment Authority

The End of the Mindless Self-Indulgence: the Gulf States

Algeria needs the price of Brent crude, an international benchmark for oil, to rise to $157 dollars a barrel. Oman needs it to hit $87. No Arab oil producer, save tiny Qatar, can balance its books at the current price, around $40 (summer 2020)….The world’s economies are moving away from fossil fuels. Oversupply and the increasing competitiveness of cleaner energy sources mean that oil may stay cheap for the foreseeable future. 

Arab leaders knew that sky-high oil prices would not last for ever. Four years ago Muhammad bin Salman, the de facto ruler of Saudi Arabia, produced a plan called “Vision 2030” that aimed to wean his economy off oil. Many of his neighbours have their own versions. But “2030 has become 2020…” 

Still, some see an upside to the upheaval in oil-producing states. The countries of the Gulf produce the world’s cheapest oil, so they stand to gain market share if prices remain low. As expats flee, locals could take their jobs…

Remittances from energy-rich states are a lifeline for the entire region. More than 2.5m Egyptians, equal to almost 3% of that country’s population, work in Arab countries that export a lot of oil. Numbers are larger still for other countries: 5% from Lebanon and Jordan, 9% from the Palestinian territories. The money they send back makes up a sizeable chunk of the economies of their homelands. As oil revenue falls, so too will remittances. There will be fewer jobs for foreigners and smaller pay packets for those who do find work. This will upend the social contract in states that have relied on emigration to soak up jobless citizens….With fewer opportunities in the oil-producing states, many graduates may no longer emigrate. But their home countries cannot provide a good life. Doctors in Egypt earn as little as 3,000 pounds ($185) a month, a fraction of what they make in Saudi Arabia or Kuwait. A glut of unemployed graduates is a recipe for social unrest…

For four decades America has followed the “Carter Doctrine”, which held that it would use military force to maintain the free flow of oil through the Persian Gulf. Under President Donald Trump, though, the doctrine has started to fray. When Iranian-made cruise missiles and drones slammed into Saudi oil facilities in September 2019, America barely blinked. The Patriot missile-defence batteries it deployed to the kingdom weeks later have already been withdrawn. Outside the Gulf Mr Trump has been even less engaged, all but ignoring the chaos in Libya, where Russia, Turkey and the UAE (to name but a few) are vying for control.

A Middle East less central to the world’s energy supplies will be a Middle East less important to America. ..As Arab states become poorer, the nature of their relationship with China may change. This is already happening in Iran, where American sanctions have choked off oil revenue. Officials are discussing a long-term investment deal that could see Chinese firms develop everything from ports to telecoms… Falling oil revenue could force this model on Arab states—and perhaps complicate what remains of their relations with America.

Excerpts from The Arab World: Twilight of the Petrostates, Economist, July  18, 2020

Barclays and Qatar: an Unholy Alliance?

U.S. authorities are investigating Barclays  for potentially violating anti-corruption laws during its scramble to raise money from Middle Eastern investors in the early days of the financial crisis.  The probe, being conducted by the Justice Department and the Securities and Exchange Commission, is at an early stage…The U.S. investigation follows a similar probe that British regulators opened earlier this year.

According to people familiar with the probe, it is examining Barclays’ use of middlemen serving as brokers to connect the bank with powerful Middle Eastern interests at a time when the bank was seeking a cash injection from investors in the region.  Barclays disclosed the investigation at the same time it reported a GBP106 million third-quarter loss…The new investigations represent the latest blows to a once-proud British institution. This summer, Barclays paid about $450 million to settle U.S. and British charges that it sought to manipulate benchmark interest rates, sometimes at the behest of top executives. The ensuing political furor led to the abrupt resignations of Barclays’s chairman, chief executive and chief operating officer.

The Justice Department and SEC investigation involves possible violations of the Foreign Corrupt Practices Act, which among other things bars companies with U.S. operations from bribing overseas politicians or corporate executives in order to win business.  In June 2008, as the financial crisis was gaining steam, senior bankers at Barclays persuaded the Qatar Investment Authority and other investors to inject about GBP4.5 billion into the British bank, seeking to erase fears about Barclays’s health. As part of that deal, Barclays hired the Qatar fund to provide “advisory services’ in the Middle East. The bank later disclosed that it was paying about GBP238 million in fees and commissions to Qatar Investment Authority and related entities.

This summer, the U.K.’s Financial Services Authority launched a formal investigation into Barclays’s public disclosures of those arrangements. The probe focused on past and present Barclays executives, including finance chief Chris Lucas, as well as on the manner in which Barclays wooed the Qataris to invest, according to people familiar with the matter.

Excerpts, Barclays Faces U.S. Anti-Corruption Probe, MarketWatch, Oct. 31, 2012