Floating the Fed’s House of Cards

Chao Phraya River at Ayutthaya, Thailand

Chao Phraya River at Ayutthaya, Thailand

(Excerpted from Chapter 5: Persian Gulf Rent-A-Sheik: Big Oil & Their Bankers…)

The elite families of the six GCC nations are heavily invested in Western economies.  High volume crude oil production keeps this investment capital flowing to Wall Street while allowing the GCC elites to live opulent lifestyles.

In this way the volume of oil production is much more important than the price received for the oil for Western bankers and the GCC monarchs alike.  In addition, the GCC nations have been following the Four Horsemen downstream and now control refineries, petrochemical operations, etc.  In this capacity they too now desire cheap crude oil stocks to fuel these endeavors.  Hisham Nazer, the current Saudi Oil Minister put it this way, “We now have a mutual bond of self-interest and reciprocal security interests.”

As Western dependence on Third World resources has increased, it has become increasingly necessary for the international bankers and their corporations to include local elite cliques in their capital accumulation schemes, making a small group of local people extremely wealthy so that this group will cooperate in selling local resources cheaply to the West.

An example of this utilization of local elites as surrogates can be seen through the case of the richest man in the world.  He is Sultan Hassanal Bolkiah, Sultan of Brunei, a tiny oil enclave on the island of Borneo, where Royal Dutch/Shell holds a virtual monopoly over the oil industry and has paid the Sultan well to keep it that way.  The Sultan of Brunei is reported to be worth over $60 billion and lives in a 1,778-room palace.

These local elite will, in turn, hand over their wealth to Western bankers for protection from devaluation and bank failure.  This robs the home country of much-needed capital and often precipitates devaluation and debt crises.  The US has itself become a debtor nation and owes its debts, in part, to these same Third World elites, who own over $1 trillion on deposit at large US banks, while their fellow countrymen live in abject poverty.  Egyptian elites, for example, hold $60 billion in deposits in foreign banks, while the average Egyptian earns $650/year. [184]  In the case of the GCC, the amount of recycled petrodollars flowing back into Western investments is truly staggering.

The Saudis alone now have over $600 billion invested abroad.  Citigroup owns 33% of the Saudi American Bank but is itself now controlled by members of the House of Saud.  In 1993 Saudi Prince al-Waleed bin Talal, owner of Saudi Commercial Bank, plunged $590 million into Citibank.  Bin Talal now owns 17.34% of Citigroup, while Crown Prince Abdullah owns a 5.4% share, making them the bank’s two largest shareholders. [185]

The Saudi Citigroup share purchases were facilitated by the Washington-based Carlyle Group, which is 20%-owned by the Mellon family that owned Gulf Oil and now owns a large chunk of Chevron Texaco.  Carlyle is led by former Reagan and Bush Defense Secretary and Reagan NSC Chairman Frank Carlucci.  George Bush Sr., James Baker III and former British Prime Minister John Major are senior advisers and board members at Carlyle.  In 1995 Prince bin Talal teamed up with Canadian developer Paul Reichmann, Loews chairman Larry Tisch and Lebanese financier Edmund J. Safra to buy London’s Canary Wharf complex for $1.04 billion. [186]

UAE ruling Sheik Zayed runs the Abu Dhabi Investment Authority.  Much of its money is handled by private investment and equity firms like Carlyle Group and Donaldson, Lufkin & Jenrette, which is 18% owned by the Saudi Olayan Group.  Olayan also owns big chunks of JP Morgan Chase and CS First Boston.  The director of the Abu Dhabi Investment Authority serves as Carlyle Group’s Asian adviser.  Bahrain plays a role in this petrodollar shuffle, serving as the key unregulated offshore banking center for both the GCC sheiks and their international mega-bank partners.

Lebanon had been the premier banking center of the Middle East in earlier days, but with Beirut reduced to rubble by Israeli shelling, merchant banking has moved to the duty-free port of Dubai in the UAE. Investment banking is centered in Kuwait.  But it is Bahrain which is home to the vast multi-billion dollar pool of money market funds which emanates from GCC Four Horsemen-derived petrodollar revenues.

Most banks in Bahrain are foreign-owned and all US mega-banks have operations there.  Many of Bahrain’s banks are owned by GCC elite and serve as a major conduit in the petrodollar recycling process.  The Kuwait Burgan Bank, for example, owns a 28% stake in one of Bahrain’s largest banks, the Middle Eastern Bank.

The most powerful firm in Bahrain is Investcorp, which took big stakes in Saks Fifth Avenue, BAT, Tiffany, Gucci, Color Tile, Carvel Ice Cream, Dellwood Foods, New York Department Store of Puerto Rico, Circle K and Chaumet. Investcorp was co-founded in 1983 by Bahrain ruling family scion Sheik Khalifa bin Sulman al-Khalifa, who owned a big chunk of BCCI.  A recent Investcorp prospectus lists the Bahrain Minister of Finance as an owner.

Investcorp’s chairman is Abdul-Rahman Al-Ateeqi, former Oil and Finance Minister of Kuwait.  Its Vice-President is Ahmed Ali Kanoo of the wealthy Saudi Kanoo family, which is worth an estimated $1.5 billion.  Former Saudi Oil Minister Sheik Yamani was one of Investcorp’s founding shareholders, along with seven members of the Saudi royal family.  Investcorp has its eight-story headquarters in Bahrain, along with a Park Avenue New York office and a Mayfair district office in London.  Sheik al-Khalifa’s partner in launching Investcorp was Nemir Kirdar, the bank’s current president who was in charge of Chase Manhattan’s Persian Gulf operations. Numerous Investcorp senior executives are Chase alumni as well. [187]

Many Investcorp purchases turned out to be flops and there is a shady side to the bank.  French jeweler Chaumet executive Charles Lefevre said Investcorp fudged Chaumet numbers to entice shareholders while trying to pawn its shares off at a higher price to other Persian Gulf investors.  Another complaint alleged that Investcorp attempted to loot the Saudi European Bank in Paris.  Investcorp board member Abdullah Taha Bakhsh, a reclusive Saudi billionaire, invested heavily in George W. Bush’s Harken Energy, along with Bahrain’s ruling Sheik al-Khalifa.

Bakhsh was accused of looting the Al Saudi Banque of Paris when it collapsed in 1988 just ahead of the strikingly similar collapse of BCCI.  Bakhsh is a shareholder in First Commercial Financial Group, a Chicago-based commodity futures trading firm which was sanctioned by US regulators for check-kiting and fraud.  Just before the Gulf War broke out, Investcorp sold a 25.8% share to an Iraqi company, despite a Bahrain law prohibiting such transactions. [188]

The Saudis and Kuwaitis are the clear leaders in GCC overseas investments.  The Kuwaiti Investment Authority has over $250 billion invested abroad and is the biggest foreign investor in Japan and Spain.  Citigroup and JP Morgan Chase handle Kuwaiti investments in the US, where the al-Sabah clan owns stock in each of the 70 largest firms listed on the New York Stock Exchange.  Their US holdings include 100% of Occidental Geothermal, 29.8% of Great Western Resources, 100% of the Atlanta Hilton Hotel, 45% of the Phoenician Hotel and 11% of Hogg Robinson.

In Germany they own 14% of Daimler-Chrysler, 25% of Hoechst (the Nazi IG Farben spin-off and the world’s 2nd largest pharmaceutical company), 20% of Metallgesellschaft and part of German retailer Asko.  In Italy they own 6.7% of Afil, the Agnelli family holding company which owns Fiat and several other endeavors.  In the UK Kuwait owns St. Martin’s Properties and 5.4% of Sime Darby.  In Malaysia their K-10 company owns the biggest newspaper, the New Straits Times Press.  In neighboring Singapore, the Kuwaitis own 10.6% of Singapore Petroleum, 37% of Dao Heng Holdings and 49% of the securities firm J. M. Sassoon.

Kuwait Oil Company (KOC), was technically nationalized in the early 1980’s, but remains close to its former parents, Chevron Texaco and BP Amoco, selling the two Horsemen oil at a discount.  KOC made wealthy the al-Sabah emirs and the al-Ghanim family, who acted as the company’s agent for decades.  By 1966 KOC bought a Danish subsidiary and became the first Middle Eastern oil company to retail gasoline in Europe.  KOC has been the most aggressive GCC firm in its overseas downstream investments.  In 1982 it bought hundreds of Q8 gas stations across Europe.  By 1987 it owned over 5,000 gasoline retailers in Europe and South Asia. [189]

The Kuwaitis even bought into one of the Four Horsemen- BP Amoco.  As of 1988 they owned a 22% share.  They have since reduced their share to 9.85%, still a controlling interest. [190]  They purchased the Naples, Italy refining operations of Mobil, own nearly 4% of ARCO (recently bought by BP Amoco), and own 2.39% of Phillips Petroleum (recently merged with Conoco).  In Spain the Kuwaitis operate the Torras Hostench chemical firm.  In Japan they operate Arabian Oil.  There was talk in oil industry circles that Kuwait was about to become the “Eighth Sister”.

All told GCC investments in Western banks and corporations total over $1 trillion.  The bulk of this is invested in long-term US and Japanese government bonds.  The GCC sheiks are crucial to floating the entire house of cards that is the global economy.

Their guaranteed purchases of US debt, which has largely been accrued through defense spending in the Persian Gulf region, keep the US dollar strong and prevent the international financial architecture from crumbling.

The emirs and their elite friends also bankroll CIA covert operations, while re-balancing their trade surpluses with the West through the purchase of US weaponry to protect their oil fiefdoms.

Dean Henderson is the author of five books:Big Oil & Their Bankers in the Persian Gulf: Four Horsemen, Eight Families & Their Global Intelligence, Narcotics & Terror Network, The Grateful Unrich: Revolution in 50 Countries, Das Kartell der Federal Reserve, Stickin’ it to the Matrix & The Federal Reserve Cartel.  You can subscribe free to his weekly Left Hook column @www.hendersonlefthook.wordpress.com

2 responses to “Floating the Fed’s House of Cards

  1. Dean: A nice account. Only question: The Sultan of Brunei being the World’s richest man, more than Rothschild? or Rockefeller?

  2. Pingback: OILIGARGHY: ‘Floating the Fed’s House of Cards’, Oil Fiefdoms and the Petrodollar Shuffle – By Dean Henderson | RIELPOLITIK

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