The highly secretive Kuwaiti government has extensive holdings throughout the world and in the United States--an estimated $80 billion in assets ranging from junk bonds and bank deposits to resort hotels and gas stations.
On Thursday, the Bush Administration moved to freeze those holdings in an effort to protect them from the invading Iraqis. But that action raised more problems than it resolved.
Analysts in the Treasury and Commerce departments scrambled Thursday to figure out how much Kuwaiti government money has found a home in the United States and just where that money resides. So far, they have been minimally successful.
And academics and members of Congress who specialize in international trade spent their day pointing out just how difficult--and possibly futile--that task is.
"While I applaud President Bush's prompt action in ordering that Iraqi and Kuwaiti assets in the United States be frozen, there is absolutely no way those assets can be identified reliably, because our government . . . has no accurate registration of foreign ownership," said Rep. John Bryant (D-Texas), who is pushing for just such legislation.
Direct investment by Kuwaiti nationals and the country's government in U.S. businesses is about $4.2 billion, said Corey Wright, an international trade specialist with the Commerce Department's Kuwaiti desk. By contrast, Iraqi investment is a mere $1 million.
"Direct investment" includes commercial real estate and corporate investment of 10% or more voting interest in a company, Wright said.
Sound pretty cut-and-dried? It's not. For starters, the U.S. government figures do not differentiate between government and private investments, so it is difficult to tell just how much will be frozen.
"And in general, the direct investment is a very small portion of Kuwait's total investment, particularly in the U.S.," Wright said. "Portfolio investment is where they primarily focus . . . stocks, bonds, Treasury notes, bank accounts."
According to Wright, investment industry sources say that the Kuwaiti Investment Authority has in excess of $80 billion in foreign investments throughout the world, with between 40% and 50% of it in the United States.
That means that the Kuwaiti government could have as much as $36 billion in U.S. portfolio investments. But a Treasury Department spokeswoman said Thursday that it is too soon to estimate how much Kuwaiti money has been stashed in U.S. securities and similar investments.
The London-based Kuwait Investment Office, an arm of the Kuwait Finance Ministry, "has no comment to make" on Kuwaiti investments, a press officer said in a telephone interview Thursday.
A few facts, however, are known:
- The Kuwait Investment Office is an indirect investor in a partnership planning to buy Columbia Savings & Loan's portfolio of troubled junk bonds for $3 billion.
The KIO owns 6% of Gordon Investment Corp., a Toronto firm that is teaming up with Hong Kong billionaire Li Ka-shing to buy the Beverly Hills thrift's bonds. Sources involved in the deal said they do not expect the Iraqi invasion of Kuwait to affect the sale, which still must be approved by savings and loan regulators.
- The KIO also is a minority owner of the posh Phoenician resort in Arizona built by controversial thrift executive Charles H. Keating Jr. The KIO has a $134-million stake in the hotel, which regulators have assessed at a market value of $297 million.
- The government-owned Kuwait Petroleum Corp. is the sole shareholder of Santa Fe International Corp., a U.S. company based in Alhambra that does oil and gas exploration and oil drilling. Santa Fe had revenue of $500 million in 1989.
"The invasion has not affected our operations and has had no impact on the business," said John Mika, Santa Fe's vice president of administration. "We have four land rigs operating in Kuwait. To the best of our knowledge, our people have not been harmed."
What's invested in the United States was only one question raised Thursday. There are many others: Can that money be found? Can it be frozen? And what will that mean to the companies involved?
According to the Treasury Department spokeswoman, "it's very important to make the distinction that we are not seizing property and they are not forfeiting property. It is being frozen in place. (In addition) all interest payments are also blocked."
Rep. Bryant, however, was dubious about the impact of the freeze. Although there are 16 government agencies that collect information about foreign investment, there is no central registry for that data, and there is no requirement that the "ultimate beneficial owner" register. In addition, much of the information is, by law, secret from Congress, the President and the press.
"Every other country in the world tracks foreign investment better than the United States," Bryant said.
Staff writers James Bates and Patrick Lee contributed to this story.