WORLD

An economy-in-exile

Kuwaitis try to keep their nation alive

ANDREW PHILLIPS October 1 1990
WORLD

An economy-in-exile

Kuwaitis try to keep their nation alive

ANDREW PHILLIPS October 1 1990

An economy-in-exile

WORLD

BRITAIN

Kuwaitis try to keep their nation alive

In separate parts of London, Kuwaiti exiles were attending to the many details of keeping their occupied nation alive. In a modest house in Bayswater, to the west, young volunteers planned a protest march against Iraq’s occupation of their country and arranged housing for members of Kuwait’s junior tennis team who were stranded in Britain after the August invasion. Ad in the city centre, in an anonymous building in the heart of London’s financial district, leading Kuwaiti financiers were grappling with problems on a much larger scale. Huddled at the headquarters of the secretive Kuwait Investment Office (KIO), they were working to reorganize Kuwait’s worldwide financial empire. The Kuwaitis lost their country to Iraq’s military might within a few hours, but with global assets of about $116 billion built on decades of oil revenues, they retain firm control of what amounts to an economy-in-exile.

Officially, the exiled Kuwaiti government has its headquarters in the Saudi Aabian hill town of Taif. But the effective centre of the country’s financial power is London, which has long-standing colonial and economic ties with Kuwait. Many of the country’s wealthiest citizens, including directors of KIO, the Kuwait Petroleum Corp. and Kuwaiti banks, were already in London for their traditional break from the midsummer heat of the Gulf when Iraqi President Saddam Hussein’s troops invaded on Aug. 2.

Since then, the Kuwaiti financial leaders have been scrambling to hold their financial empire together and to reassure the world that Kuwait is still in business. Key leaders, including Finance Minister Sheik Ai al-Khalifa alSabah, have toured European capitals spreading that optimistic message. In London, the sheik told reporters that Kuwait will ensure that its banks and other enterprises honor their obligations and carry on as before. “We’ve got all the people we need,” he said. “We are almost acting normally.”

Amost, but not quite. Immediately after the Iraqi invasion, Western governments froze Iraqi and Kuwaiti assets in their countries. The aim was to prevent Iraq from taking control of them, but the freeze made it impossible for the Kuwaitis to manage their overseas businesses. At the same time, Western banks cut lines of credit to Kuwaiti banks and other companies. Since then, however, most Western central banks have relaxed the rules to allow the Kuwaitis to manage their own affairs, and some commercial banks have restored lines of credit. Kuwait Petroleum, the state-owned oil compa-

ny, has also had to restructure its operations, which include four refineries in Europe and 6,500 service stations under the trade name Q8. The invasion cut its crude oil supply, but the company quickly found new suppliers in Saudi Aabia.

The Kuwaitis’ biggest source of financial muscle, however, is the KIO. Its London office,

located on a renowned street named Cheapside, is now world headquarters for a financial network that generates as much as $16 billion in annual income. It holds portions of some of Europe’s largest companies, including 14 per cent of Germany’s Daimler-Benz and 9.8 per cent of the British Petroleum Co. PLC. The KIO also owns gold, bonds, stocks and real estate in the United States worth between $35 billion and $58 billion, as well as Canadian assets estimated at $1.2 billion. In fact, Kuwait’s global portfolio has grown so quickly that analysts say that its income from overseas investments before the invasion ($12 billion to $16 billion a year) was even bigger than its oil revenues.

That continuing flow of money made it possible two weeks ago for the Kuwaiti govemmentin-exile to pledge $3 billion this year towards the cost of maintaining American forces in the Gulf region. At the same time, the government

is supporting tens of thousands of its citizens abroad. About 220,000 Kuwaitis are in Saudi Aabia and the Gulf states, where many are having to make do with much more modest accommodation than they were used to at home. With the region’s luxury hotels already packed, some once-pampered Kuwaitis are staying in schools and in camps built for Asian construction workers. Ad the refugees keep coming: last week, thousands of Kuwaitis fled their country for Saudi Aabia after the Iraqis opened the border on Sept. 15. But Iraqi soldiers dragged many young men from their cars and took them away—to an unknown destination.

Some exiles have taken direct action. Before the invasion, 27-year-old Naser A Marri was a successful securities analyst in London who had also worked in Brazil and the United States. But soon after Aug. 2, he took an

extended leave from his job and joined a group of 18 Kuwaitis who slipped back into their country through Saudi Aabia to fight the Iraqis. A Marri spent 10 days with resistance fighters, attacking Iraqi military posts and vehicles under cover of night, until he was shot in the right arm and side.

Back in London for medical treatment, he said last week that he wants to return to fight in Kuwait as soon as he can. Ad he insisted that the invasion has changed his values: the financial security he enjoyed in London, he said, seems less important to him now. “I can’t rest until we get the Iraqis out,” he said. “What do I need with money when I don’t even have a country?” It is a question that other Kuwaitis are likely asking themselves as they face an expensive, and possibly lengthy, campaign to win back their homeland.

ANDREW PHILLIPS in London