MINISTER FOR PRESIDENTIAL AFFAIRS TO HEAD NEW UAE

C O N F I D E N T I A L ABU DHABI 001914

SIPDIS

SIPDIS

STATE FOR NEA/ARP, EEB/IFD/OMA
TREASURY FOR D/S KIMMITT, U/S MCCORMICK, A/S LOWERY, DAS
SAEED, DAS BARTH, DAS SOBEL, RKAPROTH, CBERRY, JROSE,
KMATHIASEN
NSC FOR NRAMCHAND

E.O. 12958: DECL: 11/21/2017
TAGS: EFIN EINV ECON AE
SUBJECT: MINISTER FOR PRESIDENTIAL AFFAIRS TO HEAD NEW UAE
FEDERAL INVESTMENT AUTHORITY

Classified By: Ambassador Michele J. Sison for reasons 1.4 (b) and (d).


1. (U) On November 21, the UAE cabinet approved the
appointment of Sheikh Mansour bin Zayed Al-Nahyan, Minster of
Presidential Affairs, as chairman of the Emirates Investment
Authority (EIA). The UAE established the EIA on November 13
to invest funds on behalf of the federal government.
According to the press, EIA is mandated to draw up and
coordinate policies for investing "Federal Reserve funds."


2. (C) It is unclear exactly how the EIA will fund its
investments. MinFin A/US for Revenue and Budget Khalid
Al-Bustani noted that the federal government had its own
investment income, but declined to discuss the financing of
the planned authority. The Central Bank's Executive Director
of the Treasury Department stated that he was not aware of
any movement of funds from reserves to higher risk higher
return investments. He then stated however that the Central
Bank only managed its reserves, not the government's,
sidestepping the question of whether foreign exchange
reserves would be shifted. One ADIA official speculated that
"of course" the emirate of Abu Dhabi would finance the new
fund.


3. (C) Sheikh Mansour is one of the six sons of late UAE
President Sheikh Zayed, known as the Bani Fatima. He served
as a powerful gatekeeper to former UAE President Zayed as the
head of his office and continues as President Khalifa's
Minister for Presidential Affairs. He also serves as the
Chairman of Abu Dhabi's overseas oil investment company, the
International Petroleum Investment Company (IPIC).


4. (C) Comment: The details underlying the new federal
investment authority are still vague as are its sources of
funding. The Emirate of Abu Dhabi's considerable overseas
assets and oil revenues do not belong to the federal
government, nor do Dubai's investments. We do not have any
indications that either emirate plans to "federalize" their
own overseas investments. It is possible that Abu Dhabi, as
the primary source of funding for the federal government is
trying to wean -- at least partially -- from its reliance on
the Emirate's coffers. Interestingly, Al-Bustani asserted
that the 24 percent increase in the UAE 2008 draft federal
budget was self funded through investment and fee income and
not by an increase in Emirate (read Abu Dhabi) contributions.
It also appears clear from the appointment of Sheikh
Mansour as chair that Abu Dhabi wants to maintain a strong
say in how the new investment authority will operate. End
Comment.
SISON