Wednesday, November 28, 2007

A closer look at the Citigroup deal with Abu Dhabi

The New York Times takes an extensive look at the Citigroup-Abu Dhabi deal:
Despite its size, Abu Dhabi’s royal family has been largely content to pour money into low-return, low-profile investments — until now.

But Abu Dhabi, the largest oil producer of the seven city-states that compose the United Arab Emirates, is worried enough about the eroding value of its pile of petrodollars that it appears ready to pursue more big-ticket deals.
While Abu Dhabi contains about 94 percent of the oil reserves in the U.A.E. and includes about 87 percent of the country’s land mass, the city-state’s international profile has paled in recent years in contrast to that of its neighbor, Dubai.

Thanks to a series of big-name deals and an audacious growth strategy, Dubai is becoming a tourism destination, a regional financial center and a favored buyer of marquee assets. On Monday, Dubai International Capital said it had bought a substantial stake in the Sony Corporation.

“They are different animals,” said David Butter, the Middle East regional head at the Economist Intelligence Unit, comparing Dubai’s growth strategy with Abu Dhabi’s. “The purpose of A.D.I.A. is to invest surplus cash in assets that would provide steady gain and returns over time,” he said, while Dubai, with less oil reserves, has had to create its own sources of wealth.
Like other sovereign wealth funds, the Abu Dhabi fund is looking for investments to help diversify foreign currency reserves earned from exporting oil.

Its shift in investment strategy is not immediately being accompanied by an increase in public transparency. Several calls to the company’s headquarters in Abu Dhabi went unreturned.

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