WHEN in distress, US banks call Warren Buffett. In Europe, banks have turned to Qatar. It may only be the size of Yorkshire, but Qatar’s swoop on Deutsche Bank confirms its role as Europe’s power broker, having struck similar deals with Barclays, Credit Suisse, Dexia, KBL and Greece’s Alpha Bank.
Germany’s largest bank has announced it is raising €8bn (£6.52bn) of new capital, with €1.75bn coming directly from the Qatari royal family through its Paramount Services Holdings investment fund. In 2008, Qatar put £6.1bn into Barclays when the bank faced the threat of a government bailout. The agreement, which was structured with a series of complex warrants, earned the Middle Eastern kingdom a massive return, estimated at around £1.7bn.
But this once impoverished British protectorate, famous for pearl fishing, is unlikely to replicate its deal with Bob Diamond. The Deutsche Bank arrangement will see only straight shares being sold at a discount. However, with the German lender trading below 0.8 per cent tangible book value, there is significant upside to be gained once Europe’s summer of stress tests has come to a close.
Yet Qatar’s position as a gas power giant has changed what it wants from its deals. Yes, it is trying to insure against the finite nature of revenues from its 26 trillion cubic metres of gas. But with 2012 per capita GDP at $93,825 (£55,732), the timelines are so long dated that what it gains politically is as vital as what it does financially.
After the Glencore-Xstrata merger, where Qatar forced Ivan Glasenberg to increase his offer for Xstrata, the value of Qatar’s stake more than doubled. Its tough negotiating stance helped counter the view that Qatar’s wealth meant that it could be financially careless.
But insiders claim those negotiations were as much to do with power as they were with price. Qatar’s stakes in Iberdrola, the Spanish utility company, or Hochtief, the German construction group, have not fared so well. But stakes in luxury goods group LVMH, French media group Lagardere and Royal Dutch Shell and Total, have helped elevate Qatar into Europe’s most critical shareholder in many vital industries.
Germany will recall Qatari ownership from deals like Volkswagen-Porsche, where it helped push through the merger due to its 17 per cent stake in VW. But it is all of Europe that now has to sit up and pay attention.
Helia Ebrahimi is UK business editor at CNBC. @heliaebrahimi