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
peopleFrankie Boyle responds to referendum result in characteristically offensive style
Lewis Hamilton will start the Singapore Grand Prix from pole, with Nico Rosberg second and Daniel Ricciardo third
F1... for floodlit Singapore Grand Prix
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvHe is only remaining member of original cast
Arts and Entertainment
tvHighs and lows of the cast's careers since 2004
Fans hold up a scarf at West Ham vs Liverpool
footballAfter Arsenal's clear victory, focus turns to West Ham vs Liverpool
New Articles
i100... she's just started school
ebooksAn unforgettable anthology of contemporary reportage
New Articles
Life and Style
Couples have been having sex less in 2014, according to a new survey
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
New Articles
i100... despite rising prices
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam