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Tue 18 Mar 2008 11:09 AM

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Abu Dhabi moves to soothe US fund fears

Emirate writes letter to US Treasury pledging not to use sovereign wealth funds for political ends.

Abu Dhabi has sought to quell the West’s growing concerns over the role of sovereign wealth funds (SWF) in international finance with a letter to the US Treasury pledging not to use its money for political ends.

The letter, dated March 12 and addressed to US Treasury Secretary Hank Paulson, outlines nine principals for Abu Dhabi’s investments, according to a report published Monday by the Wall Street Journal.

It states the intentions of Abu Dhabi funds “are similar to pension funds, combining a strong focus on long-term capital returns”, and seeks to calm fears that foreign governments harbour political motivations when investing in the US, the paper said.

Abu Dhabi funds, according to the letter, seek to make “independent, commercially driven investment decisions” and will follow “all the laws, regulations and rules” of the country the fund invests in.

Abu Dhabi is home to the Abu Dhabi Investment Authority (ADIA), one of the world's largest sovereign wealth funds that has invested in major US corporations in the last year, including Citigroup, the largest US bank by assets.

SWFs, now believed to have around $2.9 trillion under management, have played an increasingly large role in providing emergency cash for stricken lenders, particularly in the US, as banks there struggle under the weight of the subprime mortgage crisis and the ensuing credit crunch.

Over the past four months, funds from Kuwait, Abu Dhabi, Singapore and South Korea have bought stakes in US banks Citigroup and Merrill Lynch, as well as Swiss lender UBS.

But the heightened activity of SWFs has sparked growing fears in the West that foreign governments are using their record budget surpluses as a tool for political ends to move the production of US companies offshore.

Concerns surrounding the motives of SWFs prompted US president George W. Bush to sign an executive order in January designed to tighten controls over the inflow of foreign direct investment.

The order requires SWFs to pass a more stringent, second review phase before foreign investment can be made in areas deemed sensitive to US national security such as energy and critical infrastructure.

Earlier this month, the world’s richest man, billionaire investor Warren Buffett, lashed out at the US government, blaming the administration’s trade policy for the rise of SWFs and rebuked critics’ claims that the funds are driven by political rather than financial motives.

In Buffett’s annual letter to shareholders of Berhshire Hathaway, the company of which he is chairman and CEO, he said the growing influence of SWFs “is our doing, not some nefarious plot by foreign governments”.

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T Crowe Semler 12 years ago

The Bush Regime has successfully "bushed" itself. They have now driven themselves into a hyper-paranoid mental state. The Bush regime's propaganda brought the majority of USA citizens into a state of paranoid fear which enabled them to push their Military Industry Corporation War and attack Iraq. This Regime is totally incompident. They are a kick-back from the "Cold War" looking to create a new enemy. However, their "dysfunctional paraniod collective ego" has bought into and believes their own propaganda machine...Buffett said,"the growing influence of SWFs “is our doing, not some nefarious plot by foreign governments”. The Bush Regime will go down in history as the worst presidency in the history of the USA...and one of the worst leaders in the history of the world.