Do Buy or not Dubai
The need to reduce US dependence on "foreign oil" is a popular refrain these days. Politicians like Alabama Senator Jeff Sessions (R) here makes the typical and I think inarguable case:
I was pleased that President Bush used his State of the Union address to point out that our current addiction to foreign oil is a matter of national security. I could not agree more. It is past time that we politicians drop the rhetoric and take decisive action. The fact that 60 percent of the oil we consume is imported represents a vast transfer of wealth away from the pocketbooks of Americans. Worse, more than 30 percent of our imported oil comes from countries that have been — or may soon be — hostile to the interests of the United States. ... While there is no simple solution to the problem, it is not rocket science either. There are three areas of critical importance where I believe great progress can be made. ... First, we must increase domestic production of oil and natural gas by allowing exploration in the Arctic National Wildlife Refuge and on Outer Continental Shelf lands where huge reserves exist. ... Second, we should take steps now to encourage the conservation and efficient use of oil, gas and other energy sources. ... Finally, as we transfer our transportation sector away from fossil fuels, we must support research and development of advanced technologies such as nuclear energy, clean coal and hydrogen power that will provide our long-term answers.
In the Middle East, particularly the oil-rich gulf sheikdoms, there is an equal and opposite recognition of the perils of oil sales to foreigners:
Gulf state investment agencies are buying stakes in overseas companies to get exposure to regions with different growth cycles and to reduce dependence on oil. With investment risks mounting in the world's major economies, Dubai International Capital, the private equity firm of Dubai's ruler, Sheik Rashid ibn Said al-Maktoum, said Tuesday that it planned to add more U.S. companies to its portfolio to hedge investments it has made in Asia and to protect against its heavy focus on Europe."It is very important for us to find and execute deals in the U.S. as we're trying to create a diversified portfolio," Sameer al-Ansari, Dubai International's chief executive, said in an interview Wednesday at the firm's London offices. Gulf state investment agencies like Dubai International, Qatar Investment Authority and Kuwait Investment Authority are buying stakes in overseas companies to get exposure to regions with different growth cycles and reduce dependence on oil. ... "We are looking for undervalued companies with hidden values and problems, but of those kinds that can be fixed," Ansari said. The fund only invests in companies whose management it has already met to make sure the executives understand the problems and can solve them with Dubai's help.
Commentary
So, dependence on oil oil works two ways. Both buyers and sellers have their own compelling reasons for not wanting to depend too much on each other. Each looks to mitigate the risk and vulnerability. The contrasts are noteworthy. The US is looking inward, trying to be more self-reliant and to leverage our own substantial natural, intellectual, and economic resources. The Gulf countries are looking outward. Funds like Dubai Investment Capital are directing their gaze toward the US, at companies Dell, Doncasters, and DaimlerChrysler. Though probably a long way off, one has to wonder whether at some point, DIC may be considering investments in firms that have developed the very same technologies that Senator Sessions wants to see developed. One has to wonder whether there would be a time when investments in such companies would be discouraged or even prohibited in the same way DP World was told to walk away from its planned ports acquisition last year.