Emirates flexes its financial muscle

Anil Bhoyrul, editorial director of Arabian Business magazine and a confidant to some of the Persian Gulf's super-rich and powerful, thought the Abu Dhabi investor would be pleasantly surprised.

He was wrong.

Even as the United States and much of the world reels from a succession of financial crises that are squelching access to credit and hampering economic growth in what a quarter of Americans are calling a depression, the oil-rich royal families of the Persian Gulf are bursting with cash they're not afraid to spend.

The investor, an Abu Dhabi royal who had earned billions last year, was not interested in a bargain -- he was looking for a huge deal to make an impressive splash internationally. A multibillion-dollar price tag, easily within his group's means, would cause far more jaws to drop than anything in the millions.

"When he thought it was $4 billion, he was really excited," said Bhoyrul, who declined to name the individual. "When he found out it was $400 million, he was disappointed."

Bhoyrul added, "There's a pressure to spend."

As experts warned of a coming credit crunch that could put a damper on the gulf's real estate boom and the regional stock markets careened wildly in tune with the U.S., the Emirates' central bank governor Sultan al-Suwaidi said last month that his nation's banks "had virtually no exposure" to the collapse of institutions such as Lehman Bros.

The region's economy hinges far more on the price of oil than the value of capital markets, which remain relatively small in the gulf states. Cash, rather than credit or clever financing, is the preferred financial instrument for transactions big and small.

Abu Dhabi, the richest and most powerful of the seven kingdoms of the United Arab Emirates, has spread its wings the widest, plunking down cash for businesses and real estate across the world, including far-flung corners such as Africa, the Balkans and Central America. The deal-making has continued even after the global financial meltdown, with the Abu Dhabi Investment House, a sovereign wealth fund, agreeing to a $6-billion real estate joint venture with China.