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Qatar: Investing Throughout the World With Oil/Gas Wealth and Vision

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The full page article in the Financial Times was a about a financial behemoth derailing what had many thought was a done deal ("Defiance marks Qatari coming of Age" 08.26.12), namely the attempted takeover of the huge London listed mining enterprise, Xstrata, by the world's largest commodities trader, Glencore. The article went on to touch upon the vast investments of Qatar Holding, offshoot of Qatar's Sovereign Wealth Fund. It is breathtaking in its diversity and reach.

Here is a nation whose infrastructure was focused on pearl "hunting" and fishing, whose economy was virtually destroyed by the introduction of Japanese cultured pearls in the 1920's and 1930's. Then in the 1940's came the discovery of oil and its enormous transformation to having achieved among the very highest GDPs in the world. Proved reserves of oil exceed 15 billion barrels, while reserves of natural gas are near 26 trillion cubic meters or about 14% of the world's gas reserves and recognized as the world's third largest. All before the advent of recent drilling advances enabling access to the vast reservoirs of shale gas throughout the world, which in itself is looming as a game changer.

The article lists many of the varied and wide "financial investments." They include not only a stake in Xstrata but recent investment in Citic one of China's largest investment firms backed by China's immense sovereign wealth fund, large holdings in Volkswagen, Porsche, Banco Santander Brazil, Barclays, Credit Suisse, J. Sainsbury, Harrods, Canary Wharf, Agricultural Bank of China, LVMH, Tiffany's, as well stakes in Shell and Siemens, Miramax Films in the US, and the Paris-St. Germain football club. This is but a sprinkling, and the list goes on.

What was not mentioned, though certainly known by many, is that Qatar, an archipelago nation off the Persian Gulf coast of Saudi Arabia, is a nation with a citizen population of but 300,000 people drawing its workforce from an array of Arab nations, the Indian subcontinent, southeast Asia among other countries, all with a total population in 2011 according to the World Bank of 1,870,041 souls. According to Forbes magazine Qatar is the world's richest country with a per capita income of over $88,000 in 2010.

Nor does the article highlight a particularly interesting and unique segue in Qatar's investment strategy. With a clear understanding that big is not always better nor effective, Qatar has immersed itself deeply into the financial sinews of Luxembourg, a nation of 500,000 citizens. This, with the purported ambition of helping to make the Grand Duchy, Europe's Islamic financial center. Last year Qatar purchased the Luxembourg operations of the Belgian Dexia and KBC banks (as an aside, Qatar Airways has also purchased 35% of CargoLux, Luxembourg's large air freight carrier). Qatar's strategic alliance has emerged with Luxembourg, a charter member of the European Union, instrumental, as then the fifth largest steel producer in the world, in the formation of the European Coal and Steel Community. The ECSC, the first international organization based on supranational principles became an organization key to helping Europe get back on its feet during the difficult post-war years and was a precursor to the European Union itself. Since those years Luxembourg has become an important and responsible financial center eliciting the comment from the Wall Street Journal some years ago that "ounce for ounce, Luxembourg is the most influential country in the world."

What will happen when two such "ounce for ounce" stalwarts combine their focus and energies is a tale yet to be told. But it's not going to be dull!