Nothing But Politics

[Amaunet]

I have been waiting for a definite sign that the Muslims have taken sides, this looks to be it.

This has future implications regarding our market and standing as a sole superpower.

The fact that the Muslim establishment is welcoming with open arms a leader such as Putin who is conducting a war against separatists using Islam as part of their ideology indicates a big change in their position.

America’s operations in the Middle East are pushing the Saudis toward Russia. They have understood that the US has written them off as partners. The EU has a more complicated political structure and it isn’t clear who they need to talk to. The Saudis of course are working with the EU. But the EU is too amorphous. There is no political will there. There is only a general opposition to American aggression and the understanding that something should be done about it. But there is no united center for making decisions. The EU is quasi-virtual. Russia, for all its infrastructural weakness, is a paternalistic government and for that reason alone it’s easier to decide concrete political issues with Russia. The “special” relationships of Muslim countries with France and Germany aren’t leading to any of the anticipated quick results. Russia, as an atomic power, is still undefined, an “X factor” for the leaders of Muslim countries.

It’s embarrassing, because there is immense intellectual potential in the Muslim world which would allow it to achieve even more impressive results. This sphere not only has a multitude of different people united by a shared religious civilizing project, but also has huge financial resources. Thousands of Muslim scientists are working in US and European labs. It is completely unacceptable that such a powerful civilization is stuck in technological stagnation. An alliance with Russia would go a long way in remedying the situation.

While Putin has done many good things for his economy, because of Russia’s strained financial condition and unfavorable come-from-behind position I was puzzled at the amount of weapons and new technology they have been manufacturing and alluding to recently. In fact Russia is now planning or has begun the most ambitious weapons modernization effort since the 1991 collapse of the Soviet Union. http://www.iht.com/articles/122932.html The reason for Russia’s new found vigor would have to be in part, I believe, an influx of Arab investments.

At the bottom of the following text you will find a reference to an entire range of projects being discussed as potentially practical avenues for Arab money including some in the aerospace industry which would explain to a degree the aggressive Russian approach which includes a manned mission to Mars or perhaps ‘star wars’.

There is absolutely no way, in my opinion that a bankrupt United States, a situation made worse as the Arabs take their money from our shores, can catch up with a Russia who is allowed the use of Arab dollars. Is it any wonder we read of the reluctance or fear at high levels to make Putin angry? Bush and cohorts know they have lost; the problem is to make sure the people do not become aware of this fact until after the election. Thus we are handed relatively inconsequential little ‘victories’ such as the Kurdish capture of Saddam to satisfy our needs as we remain oblivious of the monstrous machine that an inept Bush has inadvertently set in motion.

One of Russia’s chief allies, India, is also picked to be the beneficiary of Arab funds currently invested with the United States and Europe.

According to Sheikh Sultan bin Saud Al Qasimi, Chairman of Barjeel Securities LLC, the joint venture between Al Saud Investments of the UAE and Geojit Securities Ltd, India could attract some of the trillions of dollars in Arab funds currently invested in Europe and US markets.

He said that once laws governing the stock markets were also in place in other Gulf States, there would be a huge shift in investment channel in the region, with a stronger focus on Asian markets. As part of an aggressive and long-term growth strategy, Barjeel has appointed top professionals from India in its offices, Sheikh Saud said.
http://www.thehindubusinessline.com/bline/2002/10/24/stories/2002102401770400.htm

If the Arabs continue to shift investments what will happen to our market and when they have nothing left to lose in U.S. investments what’s to stop the Arabs and Russia from valuing their commodities particularly oil and gas in the euro?

-Am




Arab capital hits Russia


17 December 2003 07:43


Dmitri Zhantiev, Sergei Belichenko

Investors from Arab countries are demonstrating more and more interest in Russia. The official visit of Saudi Crown Prince Abdalla to Moscow in September played a key role in the promotion of Russo-Arab economic cooperation. For many years, relations between Russia and Saudi Arabia, the source of more than 60% of Arab foreign investment, were strained, in part due to mutual distrust over the Afghan War and Chechnya. However, in the last six months, the situation has rapidly begun to change. The Saudis have come to understand that Russia is one of the world’s most attractive countries for investment. At the Russo-Saudi business forum which took place in August, the president of the Saudi Arabian Chamber of Commerce and Industry Al-Juresi stated that though “Saudi investment abroad is approaching one trillion dollars, the investment potential of Saudi business is far from exhausted and businessmen in Saudi Arabia are prepared to invest tens of billions of dollars in interesting projects in Russia.”

Though no major announcements or concrete agreements came as a result of Abdalla’s Moscow visit, it did give the green light to large-scale joint projects. On December 15th, a Russian delegation headed by Evgeni Primakov, President of the Chamber of Commerce and Industry of the Russian Federation, will arrive in Saudi Arabia and meet with Crown Prince Abdalla, the Royal Ministers, and the representatives of various business circles in order to discuss a range of business projects. But this is about more than just Saudi money. In April 2004, a traveling investment forum will be held in Lebanon, and its main aim will be to attract Arab investment to Russia’s Central Federal District.


The need to diversify

Perhaps the main reason that Arab capital has gotten interested in Russia is that investors want to diversify their foreign investments. The problem is that 50% of Arab investment goes to the US, where Arab capital is feeling less and less comfortable. After September 11th, Arab investments ended up in a dangerous spot, when a group of over 600 family members of 9-11 victims sued for $1 trillion. The defendants in the case are members of the Saudi royal family, including Saudi Defense Minister Sultan bin Abdul Aziz al-Saud, seven Saudi banks, and a plethora of companies and Islamic charity funds. Should the relatives win in court, the defendants’ money and property could be confiscated. Thus, as risk increases, so does the need to diversify investments.

Nonetheless, political motives are not the most important factor. Many Arab specialists have noted that the capital exodus from the US has more to do with America’s economic situation than with political caution. Arab investor confidence in the US economy was undermined by recent events involving American corporation’s accounting practices and the endless scandals surrounding US exchanges. According to analysts, Saudi Arabia alone pulled around $200 billion out of the US, the United Arab Emirates around $3 billion, and Qatar $2.7 billion. Today money taken out of the US is predominately being held in European banks, although the search for new possible investment targets goes on. The problem is that Europe already receives a substantial portion of Arab foreign investment (more than 20%). Europe’s economy is stagnating and there are few profitable projects in which this amount of money could be invested. Lastly, Europe is too closely tied to the US and thus does not solve the diversification problem.

Other alternative investment directions, such as China and Southeast Asia, are not very relevant to Arab investors. China is currently capable of investing in its own economic growth and is more interested in investments that bring advanced technology into the country, which Arab investors are not able to do. Investment in Southeast Asia remains as risky as ever. For this reason, the only realistic alternative for large, long-term investment is Russia.

The peculiarities of Arab capital

Russia also looks attractive to Arab investors due to their specific qualities, their procedures for making decisions and usual spheres for business initiatives. Arab capital is first of all unique in its close relationship with the government and ruling families, and the largest amounts of capital come from the ruling families themselves. This is particularly prevalent in countries like Saudi Arabia, Kuwait, and the Emirates. All government affairs are administered either by clan heads or groups close to those ruling the clans. Key decisions are made by a small circle of 10-12 individuals. These people are in many ways something like the Soviet Politburo. They decide who to declare king, who to appoint to the most important government posts, determine all domestic and foreign policy, and decide everything connected to major foreign investment.

Secondly Arab investors have their own traditional business model. Arab investors prefer to have full control over a business and want to take part personally in important decisions. However, outside of their home countries this isn’t always possible. For this reason, for decades Arab investors kept their money in US bank accounts and did not invest at all. Only in the past few years have the ruling families decided to diversify their investments. The main spheres of interest for Arab businessmen in the US and Europe were real estate, construction, trade, and securities. These areas are also the most common for investors in Saudi Arabia itself. Arab investors practically do not invest in any other areas. For the most part, this is related to the nature of their capital, which is in essence the capital of a man of independent means. Thus, their main objective is to preserve their resources for the long term and earn a stable income. In this way, Saudi capital differs substantially from Western entrepreneurial capital.

Not surprisingly, the main difficulty in attracting capital from Arab countries is that the government has a great influence on all areas of business, as businessmen and politicians are relatives. Thus, the most attractive industries for Arab investors are those related to oil production, such as manufacturing oil equipment, pipes, pumps, and separators. At the same time, Arabs not only hope to invest in production, but are also willing to buy the factory’s products. A variety of manufacturing industries in Arab countries, such as heavy manufacturing, mining, infrastructure, and metal production, are already tied to Russian standards as they employ Soviet-built equipment. There is also a possibility for Russian companies to participate in oil projects in Saudi Arabia, while the Saudis could get involved in projects on Russian soil. Russian and Arab companies could moreover work together on projects in other countries.

There are already several concrete examples of this kind of cooperation. Nizhegorod Province was the first region in Russia to see investments from Arab oil companies as part of an energy cooperation program between the United Arab Emirates and Russia. At a meeting on August 9th, 2003, the governor of Nizhegorod Gennadi Khodyrev and representatives of the Sibur Neftekhim Company met with a delegation from the Emirates and discussed ways to incorporate cutting edge technology into Sibur’s petrochemical divisions. The tripartite negotiations ended in an agreement to organize a joint enterprise to transport petrochemical products along the north-south axis. The parties concluded a variety of contracts, and the work is estimated to take three years. It is also possible that province and the Emirates will continue their cooperation and construct multipurpose vessels capable of navigating both rivers and oceans.

One of the key points of discussion at the Russo-Saudi negotiations was the Crown Prince’s gas initiative. It involves the geological exploration and joint exploitation of gas deposits in Saudi Arabia, the use of natural gas to produce fresh water from salt water, the construction of gas pipelines and gas power stations, as well as other petrochemical manufacturing facilities. An intergovernmental agreement has already been signed regarding cooperation in oil and natural gas, which foresees joint control over pricing on the foreign market. Stroitransgaz and Saudi Oger will establish the first Russo-Saudi consortium.

Arab investors have also expressed their companies’ willingness to invest in a range of Russian projects as part of the federal program to update Russia’s transportation system. In part, this will involve developing the infrastructure along the north-south international transportation corridor that stretches from India via Iran and Russia to Northern Europe. Russian companies might also put in their bids for a contract to build a subway in Riyadh. The projected total cost is $10 billion. An entire range of other projects are being discussed, including some in the aerospace industry.

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