Gulf Spat Threatens to Put Brakes on Qatar's $335 Billion Empire

EghtesadOnline: The windfall from being the world’s largest exporter of liquefied natural gas has allowed Qatar to amass about $335 billion of investments around the world through its sovereign wealth fund. Now, a diplomatic spat with neighboring countries threatens to hamper the Qatar Investment Authority’s ability to continue making headline-grabbing global deals.

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06 June 2017

According to Bloomberg, Saudi Arabia and three other Arab countries cut off most diplomatic and economic tiesto Qatar Monday in an unprecedented move designed to punish one of the region’s financial superpowers for its ties with Iran and Islamist groups.

“The potential risks that Qatari investors face, including the QIA, are going to increase and new deals are probably going to become more difficult to complete and face greater scrutiny,” said Sven Behrendt, managing director of political risk consultant GeoEconomica GmbH. “Qatar has walked a fine line supporting extremist groups elsewhere in the Arab world, which has provoked this reaction from its neighbors.”

Volkswagen

The QIA is the biggest shareholder in German carmaker Volkswagen AG, with a stake worth almost $11.6 billion, including preferred shares, according to data compiled by Bloomberg. That makes it the QIA’s second-biggest listed equity investment after its nearly 52 percent holding in Qatar National Bank QPSC.

Rosneft

In December, commodity trader Glencore Plc and Qatar teamed up to buy an $11 billion, 19.5 percent joint stake in Russia’s largest oil producer from the state. The deal gave the QIA a holding of 9.75 percent in Rosneft Oil Co. and was one of the biggest investments in the global-energy industry last year, despite attempts by the U.S. and Europe to economically isolate Russia with sanctions following Russian President Vladimir Putin’s incursion into Ukraine.

Glencore

The QIA also played a pivotal role in Glencore’s $29 billion takeover of Xstrata Plc in 2012 after demanding the Swiss commodities trader boost its offer for the diversified mining group, in which it had built a stake of more than 10 percent. That merger left the QIA with an 8.49 percent stake in Glencore, worth $4.51 billion, according to data compiled by Bloomberg.

Deutsche Bank

Qatar’s royal family asked Germany’s financial regulator for approval to boost its stakein Deutsche Bank to more than 10 percent, people familiar with the matter said last month.

Former Prime Minister Sheikh Hamad Bin Jassim Bin Jabr Al Thani and the former emir of the country, Sheikh Hamad bin Khalifa Al Thani, hold a joint stake in Deutsche Bank AG of just under 9 percent, according to people familiar with the matter. Their latest regulatory filing shows a combined stake of about 6.1 percent.

Barclays

The sovereign wealth fund joined a two-stage 12 billion-pound ($15.5-billion) fundraising to help Barclays Plc avoid a state bailout during the financial crisis of 2008, with the 6 percent stake in the British lender now worth $2.76 billion, the Bloomberg data show. The U.K. Financial Conduct Authority re-opened an investigation into the Barclays deal in March, despite issuing a fine in the case four years ago.

Brookfield Property Partners

Brookfield Property Partners LP and QIA formed a joint venture on Manhattan West, an $8.6 billion mixed-use project under construction on New York’s far west side, the companies announced in 2015. The QIA will acquire a 44 percent stake in the project and opened an office in New York as part of plans to invest $35 billion in the U.S. by 2020 to diversify its oil holdings.

Plans to boost U.S. investments may now suffer as a result of the diplomatic row with other Arab countries, Behrendt said. “If this incident intensifies the debate about Qatar’s links to extremist forces, and the role that such forces play in global terrorism, companies should look into this, at least from a risk perspective," he said.