Flailing U.S. Bank Beckons Gulf Nation Investors

November 29, 2007 12:46 PM
by findingDulcinea Staff
Troubled banking giant Citigroup sells the state-run Abu Dhabi Investment Authority a portion of the company worth $7.5 billion, the latest in a string of Gulf nation investments made as the dollar tumbles and oil prices rocket.

30-Second Summary

Citigroup publicly announced the deal, inked over the long Thanksgiving weekend, on Monday, Nov. 26. The ADIA is buying a 4.9 percent stake, making it the largest single shareholder in the New York banking conglomerate.

With the credit crunch showing no sign of letting up, the dollar at a historic low, and fears of a U.S. recession running high, Wall Street investors and concerned politicians welcomed the influx of Middle Eastern money.

Sen. Charles Schumer (D-N.Y.), chairman of the Joint Economic Committee and a senior member of the Senate Banking and Finance Committees, said that the ADIA transaction “will bolster Citigroup’s capital and competitiveness, and thereby help preserve New York’s status as the world’s financial center.”

This sale was the latest in the United Arab Emirates’ worldwide shopping spree. Abu Dhabi and Dubai, the two richest regions of the UAE’s seven-emirate federation, have an estimated $5 billion to spend per week on financial holdings thanks to oil and gas revenues, according to Edward Morse, the chief energy economist at investment firm Lehman Brothers.

Other recent acquisitions by state-run firms in the UAE include Istithmar’s purchase of luxury fashion chain Barneys New York and a proposed bid for a 20 percent stake in a newly unified company comprising NASDAQ and OMX, the Nordic stock exchange.

Commenting on the deluge of dollars in the oil-producing regions, J. Robinson West, Chairman of PFC Energy, told The New York Times, "We are seeing a transfer of wealth of historic dimensions."

Headline Links: The UAE goes to Wall Street

Background: The United Arab Emirates

Key Players: The UAE’s rulers

Opinion & Analysis: Why are Gulf investors coming to America?

Reference Material: The UAE investors

Related Links: The American economy

For more information on the declining U.S. dollar, the historically high price of oil and the sub-prime mortgage crisis, see our Beyond the Headlines stories:

Most Recent Beyond The Headlines