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Arab States Lost $2.5 Trillion as a Result of Crisis (Update1)

 

By Zainab Fattah and Camilla Hall

 

Jan. 17 (Bloomberg) -- The global financial meltdown has cost Arab nations $2.5 trillion in four months and led to [color:red]60 percent of development projects in the Persian Gulf region being put off or scrapped,[/color] Kuwaitâ??s foreign minister said.

 

â??This just shows the huge damage caused by the crisis,â? Sheikh Mohammed Sabah Al-Salem Al-Sabah, also Kuwaitâ??s acting oil minister, said yesterday at a news conference during the Arab Economic Summit in Kuwait City.

 

Oil has tumbled 75 percent from a July high, as the global economy sank into recession, straining budgets of crude exporters. Saudi Arabia, Oman and Dubai, the second-largest sheikdom in the United Arab Emirates, say theyâ??ll run deficits next year as low prices squeeze revenue. Also, sovereign wealth funds have been hurt by falling stock markets. The New York- based Council on Foreign Relations estimates a fund held by Abu Dhabi, the largest sheikdom in the UAE, lost $125 billion.

 

â??Itâ??s not in the interests of the global economy for oil prices to collapse or have huge increases,â? Sheikh Mohammed said. â??There should be stability to oil prices.â?Â

 

Kuwait appointed Sheikh Mohammed acting oil minister on Jan. 12 as the third-largest OPEC producer formed its fifth cabinet since February 2006 after opposition lawmakers forced the previous government to resign.

 

Gulf Funds

 

Gulf sovereign wealth funds have invested billions of dollars in financial institutions. The Kuwait Investment Authority last January paid $3 billion for a stake in Citigroup Inc. and invested $2 billion in Merrill Lynch & Co. Abu Dhabiâ??s Investment Authority bought a 4.9 percent stake in Citigroup for $7.5 billion in November 2007.

 

Builders across the United Arab Emirates are [color:red]struggling to finance developments and sell real estate[/color] after credit dried up and a five-year surge in property prices was halted.

 

Nakheel PJSC, the Dubai developer thatâ??s building [color:red]the worldâ??s tallest tower, delayed[/color] the project on Jan. 14 after a property boom in the Gulf fell victim to the global financial crisis. Nakheel had announced a 15 percent reduction in its workforce in November and said it would scale back projects.

 

Markets worldwide are reeling from about $1 trillion of write-offs and losses. The collapse last year of financial firms such as Lehman Brothers Holdings Inc. and Fortis fueled the worst global downturn since the Great Depression.

Bloomberg

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