Abu Dhabi Dollars & Wall Street Wailers

Thursday, November 29, 2007

Abu Dhabi is the wealthiest oil-producing emirate of the seven United Arab Emirates (UAE), and a great U.S. ally in a region where there are precious few. Not only does it control 94% of the oil revenue, it has the largest sovereign wealth fund (state-owed piggy bank) worth an estimated $650 billion.

A few days ago, Abu Dhabi -- worried that its petrodollar pile is eroding against other foreign currencies, decided to invest $7.5 billion through its Abu Dhabi Investment Authority (ADIA) in Citigroup for a 4.9% stake, which itself is awash in subprime red ink.

Subprime investing old timers on Wall Street whom I have spoken to are sounding just like like NY Senator Chuck Schumer when D(ubai) P(orts) World attempted to acquiring certain leasing rights to U.S. ports last year. They are alarmed that Arabs, yes Arabs, would be permitted to acquire significant interests in U.S. financial institutions. One managing director of a major investment bank told me: "...you wait and see, this deal will be stopped!" Wrong!

Such an empty threat does a great deal of injustice to our economy. For every $1billion invested in the U.S., approximately 10,000 new jobs are created. Where do these Wall Street naysayers want Arabs to invest their petrodollars? In Russia? In China? Moreover, there is nothing they really can do about it -- just a lot of empty huffing and puffing to anyone who will listen.

The rulers of Abu Dhabi and the United Arab Emirates were very careful to check all of the boxes of both federal and state regulators to avoid the previous debacle of DP World.

When I was in the Middle East a few weeks ago, everywhere I turned there were UAE-funded infrastructure projects underway. In Morocco, the UAE is financing the revitalization of the the downtown center of its capital, Rabat. This investment is creating jobs in Arab countries that desperately need increases in employment, let alone infrastructure improvements.

Petrodollar-wealthy Arab oil producing states need to do more in their own backyard to help their fraternal Arab brothers less well off by investing more of their sovereign funds in such initiatives.

A new Arab Investment Bank (funded by the UAE, Bahrain, Kuwait, Saudi Arabia, Libya and Qatar -- which are the wealthiest Arab oil-producing states) should be created to support new investments in the region. The Arab world's new billionaire states can and should do far more to lift other Arab states out of the morass of extremism and unemployment that feeds it.

The UAE is setting a fine example by investing in its Arab neighborhood as well as in the U.S. and that is a good thing.
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