Qatar: Small State, Big Politics (17 page)

In reality, the estimated size and influence of Persian Gulf SWFs has often been exaggerated, with countries such as Malaysia, Algeria, Mexico, and Thailand having significantly more foreign reserves excluding gold.
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Within the Persian Gulf region, the QIA’s estimated assets of $85 to more than $100 billion is relatively modest compared to the holdings of Abu Dhabi Investment Authority (ADIA) and the Kuwait Investment Authority (KIA), both of which are thought to be into the hundreds of billions of dollars.
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But for Qatar, international investments assume particular significance for two primary reasons. First, these investments take place in a dynamic context within which mutually reinforcing relationships are forged with the three other aspects of the country’s foreign policy—military security, hedging, and especially branding. By and large, “sovereign wealth fund portfolios appear to act as economically driven investors.”
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In Qatar’s case, according to a high-ranking official within the QIA, the Qatari fund is engaged in a “drive to build up a diversified portfolio globally of the highest quality assets across a broad spectrum of asset classes.”
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Also important for the QIA is fostering technology transfer to Qatar through encouraging the companies it acquires to set up branches or subsidiaries in the country. When in 2009 the QIA purchased a 10 percent stake in Porsche, for example, the luxury automaker agreed to set up testing and research and development facilities in Qatar.
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Diversification and technology transfer notwithstanding, an important direct and indirect aspect of Qatar’s international investment strategy is its close alignment with the country’s foreign policy initiatives.

This alignment is both actual and perceived, supported by numerous examples.
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When in the spring and summer of 2011 Qatar had dove headfirst into the Libyan conflict by throwing its full diplomatic and military support behind the National Transitional Council (NTC) in its fight against Colonel Qaddafi,
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the emir is reported to have promised Tunisia a resumption of its investments in the country in return for Tunisia’s recognition of the NTC.
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Interestingly, although its prior investment commitments in Libya amounted to $10 billion, the QIA was initially reluctant to return to post-Qaddafi Libya because of the country’s risky investment environment.
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It thus chose to invest in Tunisia instead. A second example is the rapid increase in the volume of trade between Lebanon and Qatar, from $55 million to $93 million between 2005 and 2009, when the Doha Agreement was signed saving Lebanon from civil war, and also safeguarding Qatari investment in Lebanon in infrastructure, water and power, communications, and the health-care sectors.
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A third example comes from Syria, whose acquiescence was necessary to make the Doha Accord possible, where in 2008 the Qatari Diar announced plans to invest as much as $12 billion in the country over a five-year period.
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Second, Qatar tends to be somewhat uncharacteristically aggressive in its investment strategies compared to the other Persian Gulf SWFs, particularly when it comes to investments in Europe. Similar to the QIA, other funds have also been investing heavily in Europe. But the Qatari fund stands out for the broad range and diversity of its European investments across multiple sectors.
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In the process Qatar has acquired a reputation as “the most deal-hungry of the Gulf states.”
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In 2012, a QIA official, who boasted about the fund’s more than $30 billion assets for investments that year alone, referred to the fund’s investment strategy as “opportunistic” and maintained that whenever “anything (comes) at the right price, we are willing to buy.”
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As a 2010 report put it, none of the other sovereign wealth funds “can match the speed and scale with which Qatar has set about spending its surplus cash to acquire, either in whole or in part, some of the oldest and biggest companies in markets from Britain and France to Morocco, Sudan, the Seychelles and Indonesia.”
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According to the Qatari prime minister Hamad bin Jassem Al Thani, who is also the QIA’s chief executive officer, in 2011 alone Qatar intended to invest some $30 billion abroad, making QIA “one of the world’s most acquisitive sovereign wealth funds.”
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The fund’s aggressive investment strategy suggests that the “QIA is trying to make up for lost time.”
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As “a fast-moving, active, strategic global investor,” the QIA has quickly emerged as an important and influential actor in global real estate, financial services, health care, and construction industries.
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A 2009 report added energy, commodities, food, and water to the list of QIA’s interests.
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In a 2010 confidential conversation with the US ambassador to Qatar, a member of the QIA Executive Board outlined an investment strategy focused on three areas: “acquire distressed businesses that have cash flow problems but are otherwise healthy; invest in a broad range of commodities; and purchase, in the second half of CY 2010, commercial real estate in prime locations, principally in the United States and Europe.”
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The QIA seeks long-term and geographically diversified investment strategies.
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Although in recent years the primary focus of the QIA has been the acquisition of prime real estate in London, it has projects in Cuba, Eritrea, Indonesia, Morocco, Oman, Qatar, Sudan, the United States, and Vietnam.
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Altogether, the Qatari Diar, the real estate investment arm of the QIA, is present in thirty-two countries around the world, making Qatar one of the largest overseas property investors in the world in 2010.
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In recent years, the QIA has also entered into strategic partnerships with other SWFs to cooperate on joint investments and takeovers, as it did in 2009, for example, when it joined the China Investment Corporation to purchase $448 million worth of shares in Songbird Estates, the owner of much of London’s Canary Wharf.
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The global financial crisis that began in 2008, resulting in a serious contraction of Dubai’s financial prowess and massive slowdowns in Europe and the United States, turned out to be an investment bonanza for Qatar. The emir himself went on record on the issue: “With the current financial crisis, many countries prefer to keep their money instead of investing it abroad. For us, though, this is an opportunity that will not be repeated in the next 20 years.”
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The emir’s words cannot be neglected, at least not insofar as the QIA is concerned. The fund began to aggressively invest in stressed financial institutions in the West, spending some $8.2 billion in just the first quarter of 2008, and investing another £1 billion in Barclays Bank.
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The QIA also purchased a 24 percent share in the London Stock Exchange along with a 10 percent share in OMX, the Nordic Stock Exchange based in Stockholm.
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In 2011, as the Greek banking system teetered on the verge of collapse, Qatar agreed to the purchase of a number of stressed Greek assets, adding to the $5 billion in Greek assets and investments it had already acquired by 2010.
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In 2012 the QIA acquired a 5.2 percent stake in Tiffany’s, the US jewelry maker, becoming its largest stakeholder, adding to its stakes in the French media company Lagardere, of which it owns 10 percent, and the construction giant Vinci, of which it owns 5.6 percent.
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That same year the QIA emerged as the biggest buyer of European property, reportedly spending $4.3 billion on eight major deals that included the London Olympic Village and a shopping mall on Paris’s Champs Elysees.
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To varying degrees, Qatar’s European investments appear to have been quite profitable, having yielded more than $630 million in profits by the first quarter of 2011.
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The 2011 Arab Spring provided another investment opportunity for Qatar, with the Qatar Investment Authority investing some $543.8 million in Egypt, for example, and creating 4,000 jobs in the country’s hard-hit economy.
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As continued political instability in Egypt eroded the prospects of a speedy recovery of the country’s economy throughout 2011, Qatar announced its willingness to increase its Egyptian investments to $10 billion.
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Moreover, in August 2012, Qatar announced depositing $2 billion in the Egyptian Central Bank to help the country’s economy stabilize.
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Before the start of Libya’s 2011 civil war and Colonel Qaddafi’s eventual overthrow, Qatari investments in Libya reported amounted to $10 billion. With an estimated $700 billion needed for infrastructural repair and investment,
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Libya finds itself greatly dependent on the financial largess of the one Arab country so publicly involved in Colonel Qaddafi’s collapse. Qatar’s influence in Libya is only likely to increase over the coming years.

In 2009, Qatar invested some £2 billion in Britain, a sum that shot up to £10 billion in 2010.
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By 2012, nearly 80 percent of the QIA’s property purchases were in either London or Paris.
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These investments included some of the most prized showpieces of Britain’s economy. The
Times
of London could hardly contain its resentment:

In 1868 Colonel Lewis Pelly, Britain’s man in the Persian Gulf, arrived on a wind-blasted peninsula and struck a deal with Sheikh Mohammed Bin Thani, “a shrewd, wary old man” according to a contemporary account, with “the air of [an] avaricious pearl-merchant.”

The British Empire was merely seeking to keep peace, and the Sheikh appeared to be “the most influential man in the area,” but that simple act of recognition helped to secure his leadership and that of his heirs in Qatar. One hundred and forty years later, the scales have shifted and the sheikh’s descendants now call the shots in their dealings with the British: the Government pays homage to Qatar, peers fly there, royals seek the Emir’s favour.

We are all in his power. Without Qatar and its vast reserves of natural gas Britain would suffer power cuts or fuel rationing. Qatar, via its fleet of investment vehicles, has also invested tens of billions in Britain. It owns a quarter of our third-biggest supermarket (Sainsbury’s), a chunk of one of our biggest banks (Barclays), a stake in the London Stock Exchange, the US Embassy in Grosvenor Square, part of Canary Wharf and most of the showpiece skyscraper The Shard that is taking shape close to London Bridge.
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The article goes on to wonder if there will be a Doha branch of Harrods, Britain’s most well-known department store, which the Qataris also bought in 2010.

It seems befitting to conclude this section with a reminder of the relationship between Qatari international investments and the country’s foreign policy, one which, it must be remembered, is neither linear nor one-dimensional. On the one hand, the QIA appears to be a highly professional, and by all accounts highly successful, investment vehicle. In addition to drawing on local expertise, the QIA has attracted some of the most talented, and expensive, international bankers, who have turned it into one of the world’s most active SWFs. Given expectations of uninterrupted revenue streams from the sale of liquefied natural gas in the coming years, the QIA is expected to “grow exponentially” in the coming years.
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On the other hand, the QIA’s strategy is closely aligned with the objectives and interests of the country’s foreign policy. The work of the QIA is immensely critical to the larger domestic and international trajectory and profile of Qatar. The QIA itself is seen as one of the country’s most important institutions, as evident by its choice of leadership; Sheikh Tamim bin Hamad Al Thani is its chairman, and Sheikh Hamad bin Jassim bin Jabr Al Thani, holding the dual posts of Qatar’s foreign minister and prime minister, serves as its chief executive. Its board of directors also includes some of the Qatari regime’s most trusted, and capable, figures. Although highly opaque and secretive, the QIA’s works and operations tend to be highly politicized. According to one former employee, “People get on with their jobs but are always looking over their shoulders thinking of the implications: will it upset the Emir? Will it upset the PM?…To understand the role of the Emir and the workings of the upper reaches of Qatari Diar, you need to look at it as being more akin to the court of the Turkish Sultan c1700 than the boardroom of (a modern corporation).”
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