Identifier
Created
Classification
Origin
08ABUDHABI1270
2008-11-06 12:56:00
SECRET
Embassy Abu Dhabi
Cable title:  

ABU DHABI: WHERE THE CASH IS?

Tags:  EFIN ECON EINV ENRG PGOV AE 
pdf how-to read a cable
VZCZCXRO4592
OO RUEHDE RUEHDIR
DE RUEHAD #1270 3111256
ZNY SSSSS ZZH
O 061256Z NOV 08 ZDS
FM AMEMBASSY ABU DHABI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1715
INFO RUEHDE/AMCONSUL DUBAI PRIORITY 8020
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
S E C R E T ABU DHABI 001270 

C O R R E C T E D C O P Y - (CLASSIFICATION CHANGED TO SECRET)

SIPDIS

DEPARTMENT FOR NEA/FO, NEA/ARP (BMASILKO) AND EEB
STATE PLEASE PASS USTR (BUNTIN)

E.O. 12958: DECL: 11/05/2018
TAGS: EFIN ECON EINV ENRG PGOV AE
SUBJECT: ABU DHABI: WHERE THE CASH IS?

REFS: A) ABU DHABI 1225
B) ABU DHABI 1221
C) ABU DHABI 1141
D) ABU DHABI 1079

Classified by Ambassador Richard G. Olson for reasons 1.4 (b,d).

S E C R E T ABU DHABI 001270

C O R R E C T E D C O P Y - (CLASSIFICATION CHANGED TO SECRET)

SIPDIS

DEPARTMENT FOR NEA/FO, NEA/ARP (BMASILKO) AND EEB
STATE PLEASE PASS USTR (BUNTIN)

E.O. 12958: DECL: 11/05/2018
TAGS: EFIN ECON EINV ENRG PGOV AE
SUBJECT: ABU DHABI: WHERE THE CASH IS?

REFS: A) ABU DHABI 1225
B) ABU DHABI 1221
C) ABU DHABI 1141
D) ABU DHABI 1079

Classified by Ambassador Richard G. Olson for reasons 1.4 (b,d).


1. (C) Summary. While concerns about the health of the world economy
continue, and rumors swirl about Dubai's debt, Abu Dhabi remains
quietly confident about its financial future. This attitude is
attracting suitors from Dubai, Iceland and beyond, although officials
are believed to be focusing their efforts on the local market.
Contacts report Abu Dhabi took control of Dubai assets in exchange
for a cash injection, following a deal brokered by UAE President
Sheikh Khalifa. Despite the calm confidence projected, banking and
other mergers remain widely expected and declining oil prices could
change everything. End Summary.


2. (C) Although one Emirati official told DCM that ADIA had lost up
to 25 percent of its portfolio value, the government of Abu Dhabi
continues to project an attitude of confidence. Minister of Foreign
Trade Sheikha Lubna Al Qassimi told visiting USTR Susan Schwab that a
positive message is key to the UAE's continued economic success. The
spin, combined with high-profile private investments, such as Sheikh
Mansour bin Zayed's recent $5 billion stake in Barclay's, has
attracted governments and businessmen from around the world to Abu
Dhabi in search of cash.


3. (C) Despite the international attention, contacts report that Abu
Dhabi-based sovereign wealth funds ADIA and ADIC have been instructed
not to make investments abroad to conserve cash to support the local
market. After weeks of speculation, two senior expat advisors told
the Ambassador that the Dubai bailout had been arranged in the form
of an "asset transfer." While the exact dollar value remains
unclear, and may be dispersed in tranches, Abu Dhabi was expected to
gain equity stakes in some of Dubai's high-profile projects. We are
also hearing from business contacts that ADIA is definitely
retrenching, but that ADIC is at least hearing foreign investors out.


4. (S) Investments in Dubai come at the expense of Abu Dhabi's own
ambitious plans and required the highest level intervention.
Contacts report that UAE President and Ruler of Abu Dhabi Sheikh
Khalifa bin Zayed is directly calling the shots on financial matters.
One expat told the Ambassador that Khalifa had organized a
late-October hunting trip to Kazakhstan with Abu Dhabi Crown Prince
Mohammed bin Zayed (MbZ) and Dubai Ruler Mohammed bin Rashid (MbR) to
broker an agreement on Dubai's bailout. Advisors reportedly
presented MbZ, who is behind many of Abu Dhabi's megaprojects, with
options on what to scale back in order to provide short term
assistance to Dubai.


5. (C) More broadly, it appears the local market is adjusting to new
financial realities. Although only a fraction of the federal
liquidity injection has been utilized (Ref B),a wide range of
contacts in Dubai and Abu Dhabi report that the UAE is overbanked and
mergers are likely. Some have suggested that the major Abu
Dhabi-owned banks, including Abu Dhabi Commercial Bank and National
Bank of Abu Dhabi, could be merged to create one of the largest banks
in the Gulf. Real estate and financial firms are also expected to
consolidate in 2009.


6. (C) Abu Dhabi officials continue to argue that the high growth and
inflation of past years was unsustainable and welcome a minor
correction. Similarly, large local investors, while not bullish, are
reportedly confident thanks to well-diversified portfolios.
Investment managers say their Emirati clients remain interested in
the US real estate market; one private Emirati told ConOff he had
just purchased two condos at Tysons Corner.


7. (C) Comment. Despite the current confidence, a continued decline
in oil prices could change Abu Dhabi's outlook in 2009. If oil falls
below $50/barrel, the government will have to reconsider its
development plans. A budget deficit, which is historically funded by
ADIA, could make everyone more conservative. The sons of Sheikh
Zayed, who have personally driven much of the emirate's rapid and
high-profile growth since his death, may have to rethink their
strategy. End Comment.
OLSON