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Sheikh Who Backed Barclays Gets Another Shot With Qatars Money
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By Vernon Silver and Henry Meyer


May 12 (Bloomberg) -- On a March morning in Qatars Ras Laffan
Industrial City on the Persian Gulf, a red flame shrouded in black
smoke shoots into the haze from a 650-foot stack. The burst of
fire is burning off excess fuel as workers rush to finish
equipment that will help the nation, already the worlds biggest
exporter of liquefied natural gas, more than double output in the
next two years.
An hour away in Doha, amid the glass and steel skyscrapers
turning this desert capital into a modern metropolis, Sheikh
Hamad bin Jassim bin Jaber Al-Thani will invest as much as
$20 billion a year from the gas bonanza.
Sheikh Hamad, Qatars prime minister and foreign minister, wears a third hat: chief executive officer of
the Qatar Investment Authority, which was founded in 2005. A latecomer among nations with
sovereign wealth funds, Qatar formed the QIA to preserve its oil and gas wealth.
Last year, the Connecticut-sized emirate -- best known as a staging ground for the 2003 U.S.-led
invasion of Iraq -- earned more from LNG than oil for the first time. That milestone followed a 15-year,
$120 billion spending binge by the country on its gas, petrochemical and other industries. Gross
domestic product has surged to $101 billion, or $101,000 for each of the 1 million men, women and
children on the thumb-shaped peninsula -- among the highest per-capita GDPs in the world.
Qatar is on the verge of being transformed, says Thierry Bros, a gas companies analyst at Parisbased Societe Generale SA. Its a small amount of people with a tremendous amount of wealth.
Barclays Rebound
Now, as Ras Laffans 140,000 workers race to multiply Qatars riches, Hamad is navigating
investments overseas and at home. He bet QIA money on international banks just as the credit crisis
forced many to take government handouts.
On Oct. 31, he raised the QIAs 6.4 percent stake in Barclays Plc to as much as 12.7 percent, propping
up the U.K.s third-biggest bank after it had rejected money from Prime Minister Gordon Brown. Since
then, Barclays stock has jumped 40 percent through May 11. The QIAs original stake, purchased in July
2008, had tumbled as much as 82 percent by January. Its now up 1.8 percent.
The QIA said on April 22 it had sold 35 million Barclays shares, lowering its original stake to 5.8 percent
as part of a trading strategy. The Qatari fund said it still planned to increase its overall Barclays stake
under the terms of the October deal.
Assets Drop
The value of Qatars 9.7 percent stake in Credit Suisse Group AG, Switzerlands No. 2 bank, dropped to

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4.93 billion Swiss francs ($4.45 billion) on May 11. Credit Suisse stock has lost 20 percent of its value
since February 2008, when Hamad said he was first buying shares; its dropped about half a percent
since October 2008, when he added more.
QIA assets, which peaked at about $75 billion in June 2008, dropped to about $50 billion at the end of
March, according to estimates by RGE Monitor in New York, which researches sovereign funds. Qatars
estimated $35.6 billion in 2008 LNG exports spared the fund from a worse decline.
They got burned, says Rachel Ziemba at RGE Monitor. There was a lot of money to manage quickly
and get it invested.
At home, Hamad is deploying as much as $5.3 billion of QIA cash on shares of Qatari banks hammered
in the global rout. In March, his government agreed to buy the investment portfolios of seven local
banks traded on the Doha Securities Market.
Pile of Cash
Qatar is facing a lot of difficulties, says Laurent Lavigne du Cadet, who was CEO of Qatars biggest
investment bank, Amwal, from September 2007 through the end of 2008. The reasonable approach for
the prime minister of Qatar would be to look after its own needs and be less on the international
market.
Hamads most lucrative domestic project is Ras Laffan. Once the new LNG facilities are in full swing,
Qatar will produce 77 million tons a year, generating $292 billion from exports over five years, the
International Monetary Fund forecasts.
That will make Hamad, who turns 50 this year, steward of a growing pile of cash at a time when funds
tied to fossil fuel wealth have blown up. Norways Government Pension Fund-Global bled a record 633
billion kroner ($90.5 billion) last year, wiping out all of the gains since that nation began investing its oil
revenue 12 years ago.
Wall of Money
The key challenge will come as the wall of money hits Qatar in the next three to five years, says Kapil
Chadda, head of global banking at HSBC Qatar, the Doha-based unit of HSBC Holdings Plc.
Lavigne du Cadet expects Hamad to invest inside Qatar this year, though he doesnt rule out another
headline-grabbing deal such as Barclays.
Qatar wants to play a role and is positioning itself to be a go-between for the Western world, he says.
Hamad may get his power-broker mantle once the new gas money starts flooding in, says Simon
Maughan, a banking analyst at MF Global Securities Ltd. in London. For now, Maughan doesnt expect
big companies to come hat in hand for Qatars cash. Governments are bailing out banks, and larger
businesses can sell bonds, he says. Companies shut out from lending may court the sheikh, he says.
The QIA will be eager to try something new, he says.
Burn a Hole
The money seems to burn a hole in their pocket, he says. Its not going to be banking; its going to
be commodities: iron ore, copper.
Hamad says hell invest cautiously for now and wait for markets to stabilize. On a Thursday in January
at the World Economic Forum in Davos, Switzerland, hes receiving visitors at a ground-floor conference
room in the Arabella Sheraton Hotel Seehof.
Wearing a tweed jacket and open-necked dress shirt, hes just finished talking with hedge fund
billionaire George Soros. The next day, hell switch hats and become Qatars top diplomat.
Im meeting Prime Minister Gordon Brown tomorrow here, he says.
Hamad, a barrel-chested baritone, points to Qatars 20 billion pounds ($30 billion) of deals in London
during the past few years. We have a good partnership between us, he says. Qatar has a lot of

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investment in the U.K.


Britain is a key customer for Qatar, which has the worlds third-largest natural gas reserves, after Russia
and Iran. It may claim 20 percent of the U.K. market by 2011, up from 4 percent this year, Societe
Generales Bros says. Ras Laffans new facilities will hand Hamad more cash to invest.
The sheikh leans back in his chair and grins as he acknowledges his funds slump.
Food and Gold
With all that happened in the world, everyone is affected, even if you are clever or not clever, he says.
We need more clarity in the market. Right now, we feel there is still a choppy road in front of us.
In March, QIA Executive Director Hussain Ali Al-Abdullah gave a peek into the funds future.
We will look at food, we will look at gold, we will look at minerals, Hamads lieutenant said at an
alumni event in Dubai for the Wharton School of the University of Pennsylvania. The QIA will begin
hunting for distressed assets in 2010, he said.
Abu Dhabi and Kuwait
Like the QIA, neighboring sovereign funds are recalculating as the recession depletes the worlds last
great pools of money.
Since the start of 2008, Abu Dhabi has lost about $153 billion from what is now an estimated $300
billion fund, RGE Monitor says. In March, state-controlled Aabar Investments PJSC agreed to buy 9.1
percent of German carmaker Daimler AG for 1.95 billion euros ($2.6 billion). Kuwait has about $208
billion, down from $262 billion. The Kuwait Investment Authority is buying Kuwaiti shares to bolster the
local stock market.
Most of the investments of all the sovereign wealth funds have pretty much gone wrong, says Reji
Joseph, director of corporate finance at accounting firm KPMG in Doha.
In daily life, Qatar is one of the more relaxed among its Gulf neighbors. Unlike in Saudi Arabia, where
there are no public movie theaters and women are forbidden to drive, Qatari women take the wheel and
vote in local elections. Dohas over- air-conditioned shopping mall cinemas show films rated R for
sexual content. At night, cocktail bars with views of the crescent-shaped waterfront serve alcohol to
mostly expatriate workers.
The Pearl
Off the coast of Doha, 30,000 workers are constructing a $14 billion luxury residential and commercial
project called the Pearl on a man-made island. The Hermes International SCA shop serves a clientele
whose wardrobes often mix traditional black Islamic robes with jeans and high heels.
Natural gas gives Qatar an advantage over its oil-rich brethren. Because gas contracts can span 25
years, the QIA gets steadier revenue than if the country depended on petroleum alone. Thats why
Qatar is staking its future on its offshore gas field and, back on land, the 41-square-mile (106-squarekilometer) city where the vapor is converted into its liquid form.
The flare lighting the sky over Ras Laffan on the hazy March morning is from Qatargas 2 Train 4, so
named because stations that cool the gas into liquid are lined up like freight cars. This train is 70
percent owned by the governments Qatar Petroleum and 30 percent by Exxon Mobil Corp., the biggest
U.S. oil producer.
Tight Security
The facility will turn out 7.8 million tons of LNG a year -- a quarter of Qatars current production and a
10th of its projected new output, making it Ras Laffans first so-called megatrain.
With so much riding on Ras Laffan, security is tight. Anyone approaching the city must pull up at a
tollbooth-style building and show an identity card or passport. Inside the city, each megatrain, even
those under construction, has its own roadblock and security search. Deep-water docks await Q-Max

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tankers, membrane-lined ships almost as long as four American football fields.


On the receiving end, Queen Elizabeth II was scheduled to open a terminal in Milford Haven, Wales,
today. The Duke of York, Prince Andrew, joined Emir Hamad bin Khalifa Al-Thani at Ras Laffan in
April to inaugurate Qatargas 2.
Ruling Clan
Ties between Qatar and the U.K. have roots in the rise of the emirates ruling clan. Sheikh Hamads
family, the Al-Thanis, moved from the Qatari village of Fuwairat in 1847 to Doha, known for its pearling
and fishing, according to a government history.
The Al-Thanis amassed power via an alliance with the neighboring House of Saud in whats now Saudi
Arabia. The title sheikh, designating a tribal elder, has come to signify male members of some Gulf
royal families, the equivalent of Saudi Arabias prince.
The family kept its grip while the nation was under foreign occupation, first by the Ottoman Empire and
then by the U.K. Britain made Qatar a protectorate during World War I, after which nations turned to
the Mideast for oil.
Sheikh Hamad was born in 1959. Educated in local schools, the young royal attended university in Egypt
and studied English in the U.K., says former U.S. ambassador to Qatar Andrew Killgore. Hamads
resume on the Qatari Ministry of Foreign Affairs Web site doesnt include educational background.
The prime ministers office declined to release additional biographical material. A QIA spokesman says
education is a personal matter.
Palace Coup
Hamad wasnt groomed for leadership in the same way as his cousin, Hamad bin Khalifa, the future
emir. Hamad bin Khalifa went to the Royal Military Academy Sandhurst in England, the training
ground for British princes William and Harry.
In 1971, Qatar gained its independence and became a constitutional monarchy. Hamad took over as
minister of Municipal Affairs and Agriculture, building Qatars fishing industry and creating parks to
beautify Doha and other towns, Killgore says.
Yet natural gas would shape Qatars future -- and demand Hamads attention as a leader and investor.
As the smallest Arab oil producer in the Organization of Petroleum Exporting Countries, Qatar earned
less than bigger countries. In 1991, it first successfully extracted gas from the Gulf.
The next year, Hamad bin Khalifa assumed Qatars day-to-day business from his father, the emir. With
the younger generation in charge, Sheikh Hamad became foreign minister.
All in the Family
While the emir had ceded most power to his son, he controlled what mattered: Qatars money. In 1995,
dissatisfied with the arrangement, Hamad bin Khalifa ousted his father, who was away in Geneva,
according to All in the Family: Absolutism, Revolution and Democracy in the Middle Eastern
Monarchies (SUNY Press, 1999) by Michael Herb.
The former emir had kept much of the countrys income in Switzerland and elsewhere, says J.E.
Peterson, historian of the Sultans Armed Forces in Oman and now a Tucson, Arizona-based Arabian
Peninsula scholar. Tradition dictated that those in power share their wealth, he says.
The ruler and even the tribal sheikh received revenues from various sources and then had a
responsibility to take care of their constituents, Peterson says.
The new emir would later make wealth sharing official policy in the form of the QIA. He and Hamad
plowed billions of dollars into gas. The results were swift and bountiful. In 1997, when Qatar exported
its first LNG -- just $499 million worth -- the nations current account was negative $2.9 billion. By the
end of 1999, Qatar had quintupled LNG exports. The current account swung to a positive $868 million.

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I.M. Pei
Qatars young rulers engineered a transformation, granting women the vote in municipal elections
and turning Doha into a wonderland of modern architecture.
I.M. Pei designed the Museum of Islamic Art, a white-stone building on an artificial island. The
government backed Education City, a campus with branches of six U.S. universities, including Cornell
Universitys medical school and Georgetown Universitys foreign service program. A booster of Education
City, the emirs wife, Consort of the Emir Sheikha Mozah bint Nasser Al Missned, is one of the few
women in public life in the Gulf region.
In 2005, as gas exports soared to $8.74 billion, the emir founded the QIA. Its roughly 110 investment
professionals went to work spending on real estate, private equity, hedge funds, equities and fixed
income. Along with the staff, which occupies nine floors of a sandy-hued office tower in Doha, the QIA
created a patchwork of outside partners to gain ties with Western financial centers.
Seeking Sainsbury
Hamad tapped London-based private equity firm Three Delta LLP, run by entrepreneur Paul Taylor.
Taylor had been CEO of Rotch Property Group, which invested in London real estate. With Hamads
backing, Three Delta went after J Sainsbury Plc, the U.K.s third-largest grocer, in April 2007.
Some of the best-known buyout firms, led by London-based CVC Capital Partners Ltd., had tried to take
over the publicly traded chain that year for 10 billion pounds. After the founding family held out for
more money, the CVC-led group scrapped its offer on April 11, 2007. That left an opening for Hamad
and Three Delta.
The QIA affiliate began buying Sainsbury shares through a company Taylor ran called Delta (Two) Ltd.
On April 26, Delta (Two) announced it had acquired a 17.4 percent stake. Hamad added some of his
personal fortune, buying 300,000 Sainsbury shares.
World Stage
The deal put Hamad on the world stage for a second time that month. The first was when his cousin, the
emir, promoted him to prime minister of Qatar.
Delta (Two) boosted its stake to 25 percent and on July 18 said it was in talks to take over the
company. The Sainsbury family, with about 18 percent, opposed any acquisition that would load up
debt. Trustees of Sainsburys pension fund fought to safeguard retirement plans. The sides talked
through the summer of 2007, signing a confidentiality agreement to view financial records.
As the pension trustees dug in, the takeover fell apart. On Nov. 5, 2007, Delta (Two) dropped the
proposal, citing deterioration in credit markets and pension demands. Qatar remains the biggest
shareholder in Sainsbury, with a 27 percent stake.
Some of the groundwork wasnt possibly worked out -- just how important the whole pension situation
was, says Peter Brockwell, a London-based retail analyst at ING Groep NV. Sainsburys press office
and its public relations firm declined to comment.
A Disaster
London tabloids pounced on the failure. It is a disaster for Qatar, which made a bold bid to play in the
big league of sovereign wealth funds, Daily Mail City Editor Alex Brummer wrote in a Nov. 6, 2007,
column.
Sheikh Hamad regrouped. Seven months later, he tried again to make his mark in Britain -- this time
with a willing target. As the credit crisis deepened in mid-2008, Barclays was socked by 1.7 billion
pounds of losses on bad loans. The bank tapped Roger Jenkins, its chairman of Middle East investment
banking and investment management, to line up new capital, according to a person familiar with the
arrangement.

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The two men were introduced in 2006 by Diana Jenkins, Rogers wife, on the Italian island of Sardinia,
where Hamad summers, the person says. In July 2008, the QIA took a 6.4 percent stake. Challenger
Universal Ltd., the Qatari ruling familys private investment arm, agreed to a separate 1.86 percent
share.
Banking Stocks
Qatar got in as banking stocks were crumbling. Lehman Brothers Holdings Inc. filed for bankruptcy on
Sept. 15. Two days later, Barclays agreed to buy Lehmans North American unit for $1.75 billion.
By October, the British bank itself needed to raise money. The bank declined to take U.K. government
funds, as Royal Bank of Scotland Group Plc had done in mid-October. Yet Barclays still required cash to
meet new capital requirements. Writedowns for the first half of 2008 had ballooned to 2.8 billion
pounds. By the end of October, Barclays had written down another 1.2 billion pounds.
For a second time, Barclays turned to the Mideast. On Oct. 31, investors from Qatar and Abu Dhabi
agreed to buy 5.8 billion pounds of Barclayss convertible notes and preferred shares that paid as much
as 14 percent annual interest.
This purchase gave the QIA as much as 12.7 percent of the company. Sheikh Mansour bin Zayed AlNahyan, a member of Abu Dhabis ruling family, gained a stake convertible to as much as 16.3 percent.
British adviser Amanda Staveley, 36, and her firm, PCP Capital Partners LLP, helped with the deal,
according to Square1 Consulting, a public relations firm in London that handles her publicity.
Absolutely Appalled
The Qataris came to the table through Jenkins, the person familiar with the deal says. In the U.K.,
Barclays fended off criticism that the bank was falling under foreign control and that existing investors
hadnt been able to participate.
I am still absolutely appalled and surprised at the animosity that created in the investor community and
media, Barclays President Robert Diamond says.
The last thing we would do is say we want the government to bail us out and we want to be a burden
on the taxpayer.
Hamad had financial as well as foreign-policy motives for the deal, RGEs Ziemba says.
They did hope there would be positive diplomatic results, she says.
Cultivating the U.K. as a gas market was part of the equation. Not only do they want to increase
exports to the U.K.; they have portfolio investments in the U.K., Ziemba says.
At Davos, Hamad said he wasnt worried about Barclays and would consider raising the QIA stake
further should the bank need more capital. Since he spoke on Jan. 30, the shares have more than
doubled through May 11.
As the new gas money floods in, Hamad faces the challenge of putting more money to work. Qatar will
have billions of dollars to gain -- or lose -- depending on how well the sheikh who wears multiple hats
stacks up as an investor.
To contact the reporters on this story: Vernon Silver in Rome at vtsilver@bloomberg.netHenry
Meyer in Doha via the Dubai newsroom at hmeyer4@bloomberg.net
Last Updated: May 11, 2009 18:00 EDT

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