Last Tuesday, I told Taipan Publishing Group subscribers in Taipan Insider that one Middle Eastern country was injecting massive amounts of cash into international markets.
That's not really news nowadays, though, is it? Everyone's heard of the $7.5 billion Citigroup bailout by Abu Dhabi back in November 2007.
But things have noticably been slowing down. When billions of dollars worth of investments get halved in value in less than a year, it makes you think.
Yet for some regions, this credit crunch is an opportunity of a lifetime.
Think about it. You're an oil-rich nation with foreign currency reserves well into the hundreds of billions. Major global institutions are searching desparately for cash. Their fellow financial institutions are equally cash-strapped.
Suddenly, your country has a lot of power.
Now, who knows how long global financial systems are going to be in crisis... who knows how long major markets are going to wallow at lows not seen in decades. You need to act, and act now to secure your new position as a "Global Player."
That's just what some countries, like Abu Dhabi and Qatar, are doing.
Instead of accepting a government bailout, UK bank Barclays (BCS:NYSE) is selling stakes to sovereign wealth funds in Abu Dhabi and Qatar.
These stakes are worth about $12 billion and they will up Qatar's BCS holdings to 12.7% and Abu Dhabi's holdings to 16.3%. And while this injection might keep BCS independent from its own government, it sure gives these Middle Eastern countries a big boost in global power standings.
(By the way, another UK bank HSBC (HBC:NYSE) opted not to take UK cash for a bailout. It says it remains one of the most capitalized and liquid banks in the world. But if it does become cash-strapped, I've a feeling it'll tap China's sovereign wealth fund, CIC for funds.)
So what does a move like this mean for those oil sheikhs with wads of cash burning a whole in the country's collective pocket?
It means diversification away from oil (and the dollar). The BBC reported last Sunday, "Shares in the oil-rich Gulf region have fallen back as investors worried about the impact of the global economic downturn on the region." Meaning falling oil consumption.
But it also means power.
TAQA is one of Abu Dhabi's smaller sovereign wealth funds with about $28 billion in assets. Peter Barker-Homek is the chief executive. He told the BBC's Christian Fraser, "Abu Dhabi's sheikhs are looking beyond the simple financial return: they want to become true global players... Part of our role is really to close the divide between east and west. The end state will be a company that we hope will be one of the top 50 global employers."
That's partially why Barclays has chosen to align itself with governments outside the UK. CEO John Varley told Business Intelligence Middle East, "There has been a significant shift in the availability of capital and exonomic power in the world over the last five years and we're ensuring we're aligned with those changes.
That includes, of course, the Middle East, whose sovereign wealth funds will own about 32% of Barclays once this funding deal goes through. (China and Singapore have stakes in the UK bank, as well.)
This could be the year of "Follow the Money" as sovereign wealth funds begin to snap up deals all over the world.
The price certainly looks right...
