Gulf investors have jumped to prop up Barclays' collapsing share price with an injection of $9.4 billion. This raised the equity of Gulf investors in the bank to 30 per cent.
A new fact has been established in the globalised banking world: the clout of British shareholders and, for that matter, other bank shareholders in the EU count for less, perhaps much less, than the money which has been accumulated by the tiny Gulf kingdoms, which Iran would like to gobble up.
It is understandable that this has deeply hurt the ego of Barclays shareholders. The West hands the Emirates over $1.8 trillion a year in oil revenues. The Gulf has helped Barclays stay free from the dead hand of government in banking. Bloomberg has refused UK government help. There can be no competition in banking if the whole system is owned by the government.
The credit crunch has only been prevented from having utterly disastrous consequences by the ready availability of Gulf oil money. The wage-price spiral of the 1970s has been avoided because labour stands comparatively docile, appalled at the devastation which communism has brought to working class welfare in the countries of Eastern Europe.
The unbelievable growth and prosperity in the Gulf region has poured wealth on to Malta's shores. The maritime horizon of Malta has changed, and it has been changing steadily for some time. We see special interest cruise-liner tourists taking the gates to St John Co-Cathedral in Valletta by storm. It is, however, most unfortunate that globalised capitalism stands at the moment as if drunk with its success.
It has committed, in the nonsense subprime mortgage loans, the crime of over-confidence. Bush, with his famous Skull and Bones Harvard culture, dreamt of administering bank loans not by hard-fisted bank managers but through the internet. The result has been almost chaos. The American president was over-anxious to put a roof over his voters' heads, whether they were prepared to pay for it or not. Subprime mortgages were re-packaged and sold internationally as bonds. The Barclays case has shown that disaster was only averted thanks to Gulf money, channelled primarily through the Dubai financial centre.
Government rescuing banks is no rescue at all. It leads to laziness among top bankers and the so-called increase of the moral hazard Bank of England governor Mervyn King has always advised against. Barclays' Marcus Agius is to be praised as the world's top banker. He has been directly acclaimed as such by London's The Sunday Times as one of the top men of the fabulous Rothschild clan to which he has come to belong more by achievement than by marriage.
The Gulf Arabs should be rewarded for their co-operation with a West which has turned bare-footed Arab pearl fishermen into fabulous multi-millionaires. Iran should realise that if she wants to take over the Gulf oil wealth, which is about 80 per cent of world reserves, it will not have it.
The pattern has now been set. It is now proven that Gulf Arab money is there to bail out a temporarily erroneous EU banking system.
Great dangers menace Agius' Barclays Gulf operation. The power of his shareholders to disrupt the whole operation is far from having worked. There is a real estate correction going on in Dubai but as the Financial Times pointed out editorially last Friday doubts about the booming emirate which is so well known directly to hundreds if not thousands of Maltese are overblown.
Dubai is much more than a financial centre. It is visited by one million tourists every year. It is the regional trading hub handling an estimated 60 per cent of Iran's merchandise trade. It hosts nearly 10,000 Iranian-owned firms and is linked to Iran by more than 250 flights a week.
The FT editorial further stated that "Dubai is also more than a building site. Behind the glitzy façade of five- to seven-star hotels are clusters of knowledge industries but also less glamorous businesses such as scrap metal and second-hand cars, in both of which it is a world leader".
The outcome of the protests of Barclays shareholders to the banking strategy of chairman Agius are not yet clear and they will not be so before November 24. They are probably suffering from a delusion which is very widespread in Malta that Barclays is the sleepy bank of old, which is absolutely different from the present high risk high profit operation. It certainly requires the money of the Emirates.
Mr Azzopardi Vella, currently economic consultant with DBR Investments Ltd, has promoted the Malta Development Fund and advised S&P.
johnazzopardivella@hotmail.com