Kuwait plan to sell 170m BP shares

Oil multinationals face unsettling times as investors show their mettle

The Kuwait Investment Office (KIO) announced yesterday that it would sell 170 million shares of British Petroleum.

In a statement it said: "The Kuwait Investment Office ... announces that it has entered into an agreement with Goldman Sachs to dispose of 170,000,000 shares of British Petroleum, amounting to 3.0 per cent of British Petroleum issued share capital."

The KIO, which had been advised by Schroders, said the shares represent a core investment for the Future Generation Fund of Kuwait and KIO. It will remain a significant investor in British Petroleum with its continuing holding of approximately 6.3 per cent of the company's issued share capital.

"The KIO's holding of British Petroleum shares has, however, come to represent a disproportionate part of the Future Generation Fund of Kuwait and this is why this portfolio rebalancing exercise is now being undertaken," it added.

The motive for the KIO's sudden decision was unclear. Its action, as opaque and unpredictable as markets have come to expect from the KIO, will send a frisson through the many other countries where Kuwait holds overseas assets.

It is possible that the motivation lies in a shift of analysis of the position of BP, or of Britain as a whole. Sir David Simon, BP's chairman, is leaving the company to become Minister for Trade and Competitiveness in Europe in Tony Blair's new government.

It is possible that the arrival of a Labour government has stimulated a change in thought. But given that this was signalled well in advance, and that Mr Blair will largely continue the pro-business policies of the outgoing Conservative government, it seems unlikely.

More likely is that the decision signals a shift in internal thinking about Kuwait's financial position. Kuwait's multi- billion dollar Reserve Fund for Future Generations was very hard hit by the 1990-91 Gulf War. As well as paying for the vast costs of reconstruction, Kuwait paid large sums to the countries which fought Saddam Hussein after he invaded the Gulf emirate.

Though hardly strapped for cash, Kuwait has had to pay closer attention to its investments in the aftermath. There have been intermittent concerns about the liquidity of its investments, which may explain the statement about the balance of the portfolio.

The KIO has traditionally been a very long-term investor with large assets spread wildly throughout the world. It has been an important, if highly controversial, investor in Britain. It bought into BP in 1988, just after the 1987 stock market crash, triggering fears about the ownership of one of the jewels in Britain's industrial crown.

Kuwait's economic problems were building even before the Gulf War, as the oil price weakened and the fiscal position deteriorated. The 1982 crash of the country's unregulated Souk al-Manakh stock market left huge outstanding debts, amounting to some $20bn which were bought out by the Kuwaiti government.

Even in the year preceding the Iraqi invasion, the budget deficit was financed from earnings on overseas assets.

The Reserve Funds for Future Generations, managed by the Kuwait Investment Office, then stood at around $100bn. By 1994, that was down to about $35bn - probably lower, once loan repayments were taken into account.

Kuwait's position was further undermined by a series of bad investment decisions, in particular in Spain where KIO's operations were wound up.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor