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