* State seeks stakes in companies pegged for role in its
* Sees strong long-term outlook for commodities
* Turns towards energy, diversifying bank, property-heavy
By Regan Doherty
DOHA, May 23 Qatar's purchase of stakes in
engineering group Siemens and oil giant Shell follow a pattern
of the Gulf Arab state investing to accelerate its domestic
development and, in the case of Shell, underlines its long-term
faith in commodity prices.
Infrastructure development is particularly important as the
world's No.1 liquefied natural gas exporter implements a
$95-billion public spending plan by 2016, spearheaded by its
preparation for hosting the 2022 soccer World Cup.
The purchase of a $3 billion stake in Siemens,
Germany's most valuable company, by a Qatari state-backed entity
this month, reflects a broader trend in the region to step up
infrastructure development, analysts say.
"I see this as part of a broader strategic alliance between
Gulf funds and Western companies and not only a liquidity and
financial speculation story," said Efraim Chalamish, a sovereign
wealth fund expert and fellow at New York University.
"This is a reflection of a strong interest (by wealth funds)
in investing in (their) local markets, in addition to
diversification abroad," he said.
Gulf states including Abu Dhabi and Saudi Arabia have handed
contracts to German engineering firms in recent years to help
develop domestic infrastructure such as railways and airports,
as well as to take advantage of German technological know-how
and bring it to the region, Chalamish said.
Qatar has gone a step further by taking stakes in such
The purchase of an interest in Siemens follows its
investment in Germany's largest builder Hochtief,
which it increased last year to more than 10 percent.
Hochtief is primed for a large chunk of Qatar's
infrastructure building ahead of the World Cup, including the
country's flagship property development, Lusail, a 38 square
kilometre city that will eventually house 200,000 people.
Hochtief will also build Lusail's rail network.
COMMODITY WEALTH RECYCLED
With its investment in Royal Dutch Shell, announced
this month, Qatar is buying into the Gulf state's biggest
foreign investor. The Anglo-Dutch oil company has $ 2 1 billion
invested in the country, including a $19 billion gas to liquids
plant, called Pearl, a joint venture with the Qatar government
that went into operation last year.
The joint venture, located in Qatar's industrial city of Ras
Laffan, will process about three billion
barrels-of-oil-equivalent over its lifetime from the huge North
Field in the Gulf, the source of Qatar's massive gas reserves.
Investing in Shell marries the twin objective of ploughing
petrodollars back into the energy sector, and developing
"(The Shell stake) makes a lot of sense, for both sides.
With oil prices where they are now, Pearl is generating a lot of
cash for Qatar, probably in the neighbourhood of $10 billion per
year. It is a major contributor to Qatar's balance sheet, and it
highlights the mutually reinforcing nature of the relationship,"
said Alex Forbes, an energy consultant based in London.
"Qatar is very important to Shell, and Shell is very
important to Qatar."
The Qatar sovereign wealth fund's investment in Shell, which
sources say could be up to a 3 percent stake, follows its
build-up in recent months of a 3 percent stake in Shell's French
Investing in oil companies marks a diversification of sorts
for the fund, whose portfolio is already replete with banking
and property stakes, including Credit Suisse, Barclays
, Agricultural Bank of China and Santander
The sovereign fund, whose assets top $100 billion, executive
board member Hussain al-Abdulla said in April, is also eyeing a
stake in Italy's Eni oil group, according to media
In addition, the fund has "trophy" holdings such as London's
famed Harrods department store, and investments in German
carmakers Porsche and Volkswagen.
"I believe this spree into energy is part and parcel of a
broader diversification strategy. After investing heavily in a
range of sectors, they are turning to energy also. They have
always liked real assets such as gold, metals, agriculture and
land," said Rachel Ziemba, director at Roubini Global Economics
based in London.
"I don't think this means they will shun other sectors, just
that they are narrowing out some overweights, and continue to
invest in areas supportive of domestic development."
BACK DOOR TO GLENCORE
Qatar's wealth fund has also been quietly building up its
stake in Anglo-Swiss miner Xstrata, which could now give
it a back door entry to Glencore, the world's largest
Glencore plans to merge with Xstrata, and Qatar's 8.7
percent stake in Xstrata is seen paving the way for a deal,
which is opposed by some of Xstrata's shareholders.
A senior executive of Qatar's secretive sovereign fund gave a
rare insight into its thinking when he said last month that the
financial crisis had restricted investment in commodities and
that he expected a supply-demand gap to emerge by 2016 or 2017.
"We like commodities, we like to invest in commodities.
Since 2002, the commodity price trend keeps going up," Qatar
Investment Authority executive board member Hussain al-Abdulla
Qatar surprised many observers by passing on commodities
trader Glencore's initial public offering last year as
rival Abu Dhabi fund Aabar bought into the flotation.
Gold presents an especially tempting target, those close to
the fund say, though Qatar has moved cautiously in that
A unit of Qatar's fund last October agreed to provide a $600
million project financing loan to European Goldfields -
its first ever investment in a gold miner - though it has yet to
purchase an outright stake, despite strong expectations it
"Gold is still a big draw for them. They're still looking at
that sector. They want manufacturing hard-type assets such as
factories, not so much the financials," said a Doha-based
advisor to the fund.