The power held by the Kuwait Investment Authority is not one to be mishandled. Bader al-Saad, managing director, is really doing an impressive job and must commended. In a recent news report the KIA ‘warned’ Germany that it ‘may cut back’ its commitment to invest in Europes largest economy if the Berlin government regulates sovereign wealth funds. German politicians are fearful of the influence sovereign wealth funds can wield and their capacity to buy leading national companies or key national infrastructure.
“We still consider Germany an economic anchor in Europe, even in the world. We still like to invest in Germany. But in the future, any regulations on sovereign wealth funds in Germany could limit our engagement in your country… We are very surprised by the Germans fear of sovereign wealth funds. We have been in Germany for more than 45 years… We are very concerned”
- Bader al-Saad, managing director
Following Bader al-Saad’s remarks - AND TO PROVE THE KIA’s POWER - Peer Steinbrueck, German Finance Minister, is due to travel to Kuwait where he is expected to meet managers at the sovereign wealth fund to improve relations.
Details of the situation:
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The German government plans to extend existing legislation that gives Berlin a veto on takeovers of defence firms to include other industries, though Steinbrueck has said Germany does not want to scare off sovereign wealth funds.
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Steinbrueck has previously described the German plans to defend domestic firms as modest compared to those of other countries, including Britain, France and the United States.
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Soveriegn Wealth Funds control over $2 trillion (roughly the size of Frances economy) and are forecast to grow rapidly to $12 trillion by 2015.
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In recent months, funds from Asia and the Middle East have injected money into major banks like Citigroup, Merrill Lynch & Co and UBS AG after they were hit by exposure to the US subprime crisis.
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The Kuwait Investment Authority control 7% of German Automaker Mercedes-Benz (Long-term)
1.
The KIA does not invest in order to exercise power or control.
The KIA invests in order to make money.
Germany is a member of the European Union( EU).
Spain also.
On Saturday May 24, 2008, the UAE agreed to establish a joint economic committee with Spain, during a state visit by King Juan Carlos to the Gulf state. (1)
The German government however does not want a foreign government to gain control over the German economy.
The German government thinks that due to its government control,
and due to the fact that the KIA may harbour political motivations,
the KIA has the potential to be used to effect non-financial outcomes.
In order to maintain that power or control in German hands, not necessarily in hands of the German government,
the German government wants to regulate sovereign wealth funds (SWFs).
The German government wants to achieve this regulation of SWFs by extending existing legislation,
contained in its Foreign Trade Act (Aussenwirtschaftsgesetz),
that gives the German government a veto on takeovers of defence firms,
to include leading national companies or key national infrastructure.
2.
OPEC does not sell oil (in the US) in order to exercise power or control.
OPEC sells oil in order to make money.
The US government does not want a foreign government to restrain trade in the US.
The US government thinks that OPEC is restricting oil supplies and that OPEC member states are colluding to set US dollar prices of oil.
Defying a White House veto threat, the house of representatives of the US congress on Tuesday May 20, 2008, therefore overwhelmingly approved a bill that would allow the US department of justice to file charges against the Member States of OPEC for allegedly restricting oil supplies and colluding to set US dollar prices of oil.
The bill would replace the per-se-approach, in oil-price-fixing cases with the ‘softer’ rule of reason and is therefore the first step towards the complete repeal of the immoral antitrust laws.
see my In Defense of OPEC, May 22nd, 2008, on my blog
http://bphouse.com/blaze/honest_money/
3.
In the USA, antitrust law will be repealed.
Indeed, as I said, US president Bush has threatened to use his veto against to American attempt to sue OPEC.
So, it seems likely that the American attempt to regulate OPEC will fail.
If Kuwait and other OPEC-Member States manage to fight off the American attempt to sue them for allegedly restricting oil supplies and colluding to set US dollar prices of oil,
it may well be that the KIA will fight off the German attempt to regulate SWFs.
But Germany is not in the USA, but in the EU.
The USA is attacking OPEC for allegedly RESTRAINING COMPETITION on the market for goods and services.
4.
Germany and the EU seem to be attacking SWFs on the market for corporate control or on the market for control of assets.
Yes, Germany has declared war on the Gulf countries on the basis of its Foreign Trade Act.
Students of EU Law (Germany, like Spain, belongs to the EU) can, however, not fail to recognise here the notion of “ABUSE OF DOMINANT POSITION” as known in article 82, formerly article 86, of the EC Treaty which provides that:
any abuse by one or more undertakings of a dominant position within the common market in a SUBSTANTIAL PART OF IT shall be prohibited as incompatible with the common market in so far as it may affect trade between member states.
The prohibition is followed by a list of examples of abuse. (2)
In the case Michelin v. EU Commission (case 322/81), the European Court of Justice adopted the test for DOMINANCE which is now usually referred to as:
a position of economic strength enjoyed by an undertaking which enables it to hinder the MAINTENANCE OF EFFECTIVE COMPETITION of the relevant market by allowing it to behave to an appreciable extent independently of its competitors and customers, and ultimately of consumers.
When the market is highly fragmented the Commission has even suggested that a share of 20-40 per cent could constitute dominance (10th Report on Competition policy). (3)
The KIA controls ONLY SEVEN per cent of German Automaker Mercedes-Benz (Long-term holding: approximately 30 years), says the article above.
That’s only ONE-THIRD of 20 per cent.
At present, the German federal government wants to amend its Foreign trade Act in order to be able to control acquisitions of more than TWENTY-FIVE percent of a company by non-EU aliens, when the company is important for ‘STRATEGIC INFRASTRUCTURE’ or ‘PUBLIC SECURITY’ of the country, wrote the German financial daily Handelsblatt, on Tuesday, May 20. (4)
Just as president Bush will make sure that Kuwait and other OPEC-Member States will manage to fight off the American attempt to sue them for allegedly restricting oil supplies and colluding to set US dollar prices of oil,
so will Charts and Numbers make sure that the KIA fights off the German attempt to regulate the KIA.
Ivo Cerckel
Notes
(1)
UAE, Spain forge economic, military ties
by Lynne Roberts on Sunday, 25 May 2008
http://www.arabianbusiness.com/520121-uae-spain-forge-economic-military-ties
The UAE on Saturday agreed to establish a joint economic committee with Spain, during a state visit by King Juan Carlos to the Gulf state
(2)
Josephine Steiner, Lorna Woods and Christian Twigg-Flesner, “EU Law”, Oxford University Press, 2006, 9th ed., p. 607
(3)
Steiner, et alt., op. cit., p. 61)
(4)
Künftig will die Bundesregierung den Erwerb von mehr als 25 Prozent der Anteile an deutschen Unternehmen durch Nicht-EU-Ausländer prüfen können, wenn die Unternehmen für die „strategische Infrastruktur“ und die „öffentliche Sicherheit“ des Landes wichtig sind.
HANDELSBLATT, Dienstag, 20. Mai 2008, 14:44 Uhr
Finanzminister in Kuwait
Steinbrück: Staatsfonds „sehr willkommen“
http://www.handelsblatt.com/News/Politik/Deutschland/_pv/doc_page/1/_p/200050/_t/ft/_b/1432382/default.aspx/steinbrueck-staatsfonds-sehr-willkommen.html