Jewish brains, Arab money

Dankner sets up new investment fund with Saudis

Israeli business mogul says sees ‘huge potential in emerging markets, which serve as long-term growth engine’

An interesting collaboration between Israel and Saudi Arabia has come to light. IDB Group, chaired by Nochi Dankner, is establishing a $1 billion investment fund together with Saudi partners in Swiss bank Credit Suisse to invest in emerging markets in Latin America, Asia, Europe, the Middle East, and Africa.

The fund will be called EMCO and will be the first investment collaboration of its kind between an Israeli company and a the Saudi investment company belonging to the Olayan family, a Qatari government investment company, and Swiss bank Credit Suisse, in which IDB holds 3.2% of its shares.

IDB will invest $250 million in the fund in accordance with the rate of investment. The investments will be made via two of IDB’s subsidiaries – Koor Industries and Clal Insurance.

The fund’s first investment priority will be in crude oil, gas, and coal. One of its top countries for investment is Indonesia.

Nochi Dankner, who holds the controlling interest in IDB, said, “Being significant share holders in Credit Suisse for two years allows for a unique opportunity to establish a joint Credit Suisse fund with three of the bank’s large shareholders.

“We see large potential in emerging markets, which are a long-term growth engine of the global economy. The strengthening of the emerging markets is part of a significant political-economic process occurring in the world – one of whose peaks was the financial crisis – which in its essence is the transfer of economic hegemony from the West to the East.

“This move is an important layer in our strategy to continually expand IDB’s activities abroad while creating a balanced business mix of investments in developing markets and in emerging markets.”

Politics sidestepped as Israeli businessman, Arab oil nations join forces

Sever Plocker, YNET

Western investment houses estimate that oil-producing Muslim countries have accumulated assets of futures worth $2,500 billion. Some $2,000 billion of these are in the hands of the sheikhs and princes in Persian Gulf states – Saudi Arabia, Abu-Dhabi, Qatar, and others. They lost quite a bit of their wealth in the recent financial crisis, but seem to recovering nicely.

This year, they have purchased via London banks at least $250 billion worth of US bonds. They are seeking out ways of diversifying their massive fortunes – apparently the largest accumulation of wealth in the new age – without provoking waves of opposition throughout the world, which is paying 50 times the price of production for a barrel of oil.

An American businessman who travels often to the Persian Gulf (where he removes his kippah) recently told me that leaders of the ruling families in the oil empires are setting their sights on Israel with great desire to cooperate with the Jewish State. Jewish brains and Arab money – what could be better?

But politics keeps them at bay.

Nochi Dankner, chairman of the IDB Group and one of Israel’s most prominent businessman, found a way of circumventing the politics that block ties between the business communities in the Gulf and in Israel. More than two years ago, Dankner purchased shares of Credit Suisse via Koor Industries, an IDB Group subsidiary. Today he holds 3.2% of the bank’s wealth.

The bank’s other major shareholders are the Qatari government (6.6%) and Saudi business group Olayan (about 10%). Under the Credit Suisse umbrella, a beautiful friendship blossomed between Dankner and the Arab representatives, to the ponit where the sides are exchanging gifts. In this same spirit, the joint emerging markets investment fund was created. The fund is worth $1.1 billion and is equally split between the largest private Israeli corporation and the Qatari and Saudi investors.

This is not merely a financial move. Persian Gulf rulers and investors have inconceivable wealth and don’t need a credit line from Koor Industries or Clal Insurance. A quarter of a million dollars is peanuts for them. They are embracing Nochi Dankner for other reasons. It is meant to signal their sincere desire to openly conduct joint business with Israel.

To what extent are they being overt? The statement on the fund’s launch was delayed by a day due to a disagreement between IDB Group and the Qatari partners. The latter were hesitant to give their agreement to Credit Suisse’s official announcement that explicitly mentioned the name of the Israeli partner in the new fund. They preferred that the only announcement to this effect be published by IDB in Tel Aviv.

Dankner vehemently opposed. The deal was on the verge of being cancelled until a redeeming version was agreed upon. The Swiss bank’s announcement ultimately spoke of “three large shareholders” without mentioning them by name.

Is economy on verge of change?
The wavering stance of the Qatari royal investment company was influenced by the personality of the figure heading it: Hamad bin Jabr al-Thani. Al-Thani serves as the prime minister of the Qatari government and enjoys an exceptional leadership position in the Arab League. He is the policymaker who drafted the recent decision promoting the renewal of direct talks between Palestinian President Mahmoud Abbas and Prime Minister Benjamin Netanyahu.

The fact that he has given a green light to the largest of his country’s royal businesses to connect with an Israeli holding company, and even sit with its members on the board of directors of a joint fund, has far-reaching political significance that must be carefully weighed, the Qataris said in their own defense.

The Saudis, on the other hand, were prepared to accept any wording for the announcement, including one that would explicitly highlight the partnership with Israel. Olayan is a strong group of private companies deeply rooted in the Saudi economy. Its assets are valued at $25-30 billion at least. As such, the group “can choose its partners as it sees fit, even Israeli partners, and no one will dare shout,” said an official associated with the Saudi regime.

Investment decisions will be made jointly by the Qataris, Saudis, and the Israelis, who will sit together on the board of directors. The fund will specialize in financing relatively small projects, some tens of millions of dollars across the emerging markets of Asia, Europe, and Latin America. It opens doors to new Israeli investment in markets where it was previously conducted secretly.

The obstacle on the path to the Persian Gulf has been lifted and Israel, in the form of two IDB subsidiaries, has entered. Nochi Dankner is there – a personal and a national accomplishment.

However, the celebration may turn out to be premature, with Qatari and Saudi partners possibly asking to maintain a very low profile in the wake of domestic criticism. Yet given the contacts that led up to the fund’s establishment and given its character, there’s much greater probability that this will serve as the beginning of a beautiful friendship, and that Israel may be on the verge of a turning point that may have an immense effect on our economy.

The greatest wealth in the world is just around the corner from Tel Aviv, across the Eilat Gulf. Should Israel connect to it, and even to a small portion of it, our economy’s scope would change completely.