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
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Guru Careers: Tax Manager / Accountant

£35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...

Ashdown Group: Contracts Executive - City of London

£35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...

Recruitment Genius: Call Centre Debt Collector - Multiple Roles

£21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

Day In a Page

Giants Club: After wholesale butchery of Idi Amin's regime, Uganda’s giants flourish once again

Uganda's giants are flourishing once again

After the wholesale butchery of Idi Amin's regime, elephant populations are finally recovering
The London: After 350 years, the riddle of Britain's exploding fleet is finally solved

After 350 years, the riddle of Britain's exploding fleet is finally solved

Archaeologists will recover a crucial item from the wreck of the London which could help shed more light on what happened in the vessel's final seconds
Airbus has patented a jet that could fly from London to New York in one hour

Airbus has patented a jet that could fly from London to New York in one hour

The invention involves turbojets and ramjets - a type of jet engine - and a rocket motor
Tate Sensorium: New exhibition at Tate Britain invites art lovers to taste, smell and hear art

Tate Sensorium

New exhibition at Tate Britain invites art lovers to taste, smell and hear art
10 best sun creams for kids

10 best sun creams for kids

Protect delicate and sensitive skin with products specially formulated for little ones
Ashes 2015: Nice guy Steven Finn is making up for lost time – and quickly

Nice guy Finn is making up for lost time – and quickly

He was man-of-the-match in the third Test following his recall to the England side
Ashes 2015: Remember Ashton Agar? The No 11 that nearly toppled England

Remember Ashton Agar?

The No 11 that nearly toppled England
Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks