Kuwait's KIA warns Berlin not to regulate wealth funds

BERLIN May 18 (Reuters) - The Kuwait Investment Authority (KIA) has warned Germany it may cut back its commitment to ploughing funds into Europe's largest economy if the Berlin government regulates sovereign wealth funds.

Many German politicians are nervous about the influence sovereign wealth funds can wield and their capacity to buy leading national companies or key national infrastructure.

KIA managing director Bader al-Saad told weekly magazine Der Spiegel that Germany's reservations about wealth funds had not yet influenced the investment activities of the KIA, which manages the Gulf Arab state's oil-generated assets.

"But we are very concerned," he added. "We still regard Germany as an economic anchor in Europe, and in the world... But in the future any regulation of sovereign wealth funds could restrict our commitment to your country."

German Finance Minister Peer Steinbrueck is due to travel next week to the Arabian Gulf region, where he is expected to meet managers at sovereign wealth funds to improve their relations.

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.

"We are very surprised by Germans' worries about sovereign wealth funds. We have been in Germany for more than 45 years," Saad said.

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.

The planned new legislation will not name "strategic" sectors that are off-limits to foreign investors.

Government-owned investment vehicles control over $2 trillion -- roughly the size of France's economy -- and are forecast to grow rapidly to $12 trillion by 2015.

In recent months, funds from Asia and the Middle East have injected money into major banks like Citigroup Inc (C.N), Merrill Lynch & Co Inc MER.N and UBS AG (UBSN.VX) after they were hit by exposure to the U.S. subprime crisis. (Writing by Paul Carrel; Editing by Jason Neely)