CRISIS IN THE PERSIAN GULF : Restrictions Lifted on Kuwaiti Holdings in U.S.

Following the lead of British authorities, the U.S. Treasury Department has eased some of its restrictions and licensed Kuwait’s huge investment arm to conduct normal operations in the United States.

After Iraq’s invasion of Kuwait on Aug. 2, President Bush signed an executive order barring trade with Iraq and freezing that country’s U.S. assets. A second executive order signed at the same time froze Kuwaiti assets--a step taken to prevent Iraq from seizing Kuwaiti property in the United States.

The Treasury’s action will allow the Kuwait Investment Office’s U.S. branch to pay its staff and permit U.S. financial institutions to accept new deposits and clear checks written on the previously blocked accounts of Kuwaiti-controlled U.S. firms. The investment office is an arm of the Kuwaiti government that was ousted by the Iraqis.

The Kuwaiti-controlled U.S. companies will be permitted to conduct business as usual so long as the government of Iraq does not benefit from the transactions in the blocked accounts.

“(The investment office) had asked us for permission to conduct normal operations,” a Treasury official said. “We didn’t see any problem with that.”

Treasury officials approved the plan late Tuesday night as the Bush Administration wrestled with how best to manage its freeze on Iraqi and Kuwaiti assets in the United States but the decision was not announced immediately.

Late Thursday a Treasury official said a new administrative order was being prepared for Bush’s signature that would modify some aspects of the original freeze on assets and trade with the two Middle Eastern nations.

The Kuwait Investment Office is a low-profile international financial player that has been a major investor around the world. It has owned shares in dozens of European companies, including West German car maker Daimler-Benz, British Petroleum, the world’s third-largest oil company, and Spain’s largest bank, Banco Central.

Kuwait is estimated to hold about $50 billion worth of assets in the United States, according to David Mizrahi, editor and publisher of Mideast Report, a New York-based newsletter that follows Arab investments in the United States.

Kuwait holdings are mainly in real estate, stocks and bonds, said Mizrahi, adding that Kuwait’s investment in Santa Fe International, an Alhambra-based oil drilling and exploration company, probably ranks among its largest holdings in this country.

The United States, Japan and most major European nations have all imposed freeze orders on Kuwaiti and Iraqi assets. But there has been little effort to coordinate the procedures and regulations each country adopts.