Petrodollar flows to financially ailing US companies
Sunday, 15 June 2008
Fazle Rashid from New York
Arab nations are awash with petrodollar. Already rich Arab nations have further been benefited due to the current oil boom. The United States in particular and other western nations allege that a part of the wealth from the Arab nations has gone to financing the Islamic Jihadists. An allegation that has been vigorously denied by the Middle Eastern countries.
But what is evident and deliberately lost sight of is the fact that pertrodollar have gone to giant American companies with a view to salvaging them from collapsing. Kuwait Investment Authority (KIA), a state-owned enterprise, for instance has made huge investments in the financial sector in the US.
The Kuwaiti company has provided big doses of funds to two giant American banks, namely, Citigroup and Merrill Lynch, which were limping due to the disaster in the subprime lending.
Two American banks have benefited to the tune of $5.0 billion. The fund helped two banks to raise their capitals. KIA is contemplating further investments in the troubled US banks. Arab states and companies buoyed by the record oil price invested about $60 billion on foreign assests, almost double the amount of the previous two years combined. Abu Dhabi Investment Authority bought stock amounting to $7.5 billion in Citigroup. KIA has also invested about $800 million in American credit card company, VISA.
The Kuwaiti company has bought Willis Building for 400 million pound. The United Arab Emirates has categorically stated that it has no immediate plans to delink its currency from the US dollar or revalue its currency. The UAE denied speculations that it was under pressure to do so from foreign countries. Arab countries including Saudi Arabia have defended the status of US dollar as world's reserve currency. Qatar will do the same.
The policy to do so by Arab nations, despite a weakening dollar, has not been explained. Inflation in the UAE and Qatar have risen to 11 and 14 per cent respectively. Saudi Arabia's Alinma bank which is operated under sharia law has seen its shares rising by 60 per cent. It has become the seventh largest bank of the kingdom by market value. Saudi Arabia, the world's largest oil exporter, saw its economy growing 'on a near seven-fold surge in oil prices during the last six years'.
Demand for financial services that comply with Islamic sharia is growing at twice the rate of that for conventional services. Sharia compliant assests now stands worldwide at $700 billion. Malaysia was the first Muslim country to begin sharia-compliant financing.
Arab nations are awash with petrodollar. Already rich Arab nations have further been benefited due to the current oil boom. The United States in particular and other western nations allege that a part of the wealth from the Arab nations has gone to financing the Islamic Jihadists. An allegation that has been vigorously denied by the Middle Eastern countries.
But what is evident and deliberately lost sight of is the fact that pertrodollar have gone to giant American companies with a view to salvaging them from collapsing. Kuwait Investment Authority (KIA), a state-owned enterprise, for instance has made huge investments in the financial sector in the US.
The Kuwaiti company has provided big doses of funds to two giant American banks, namely, Citigroup and Merrill Lynch, which were limping due to the disaster in the subprime lending.
Two American banks have benefited to the tune of $5.0 billion. The fund helped two banks to raise their capitals. KIA is contemplating further investments in the troubled US banks. Arab states and companies buoyed by the record oil price invested about $60 billion on foreign assests, almost double the amount of the previous two years combined. Abu Dhabi Investment Authority bought stock amounting to $7.5 billion in Citigroup. KIA has also invested about $800 million in American credit card company, VISA.
The Kuwaiti company has bought Willis Building for 400 million pound. The United Arab Emirates has categorically stated that it has no immediate plans to delink its currency from the US dollar or revalue its currency. The UAE denied speculations that it was under pressure to do so from foreign countries. Arab countries including Saudi Arabia have defended the status of US dollar as world's reserve currency. Qatar will do the same.
The policy to do so by Arab nations, despite a weakening dollar, has not been explained. Inflation in the UAE and Qatar have risen to 11 and 14 per cent respectively. Saudi Arabia's Alinma bank which is operated under sharia law has seen its shares rising by 60 per cent. It has become the seventh largest bank of the kingdom by market value. Saudi Arabia, the world's largest oil exporter, saw its economy growing 'on a near seven-fold surge in oil prices during the last six years'.
Demand for financial services that comply with Islamic sharia is growing at twice the rate of that for conventional services. Sharia compliant assests now stands worldwide at $700 billion. Malaysia was the first Muslim country to begin sharia-compliant financing.