ABSTRACT
Through their respective sovereign wealth funds, the Arab Gulf States have become significant actors in global financial markets. This was clearly evident during the 2008 crisis. Yet, the relationship between SWF assets and global financial crises has a much longer precedent, starting essentially with the oil boom in the 1970s. As global financial flows and trade shift toward developing and formally developing countries, so have the assets of these various states’ institutions. This shift comes after repeated instances of their investments being met with resistance in Western markets. These concerns have receded somewhat, but the Arab states have turned their investment focus toward Asian and African markets. These regions are more receptive of the investments. The Arab Gulf states’ investment vehicles remain primarily return-focused entities. This is underlined by the overwhelming amount of SWF capital that is externally managed. In this regard, Western concerns of politically charged investments from the Gulf are exaggerated, if not baseless. The real concern for Western financial markets should be the naturally occurring shift toward developing, and formally developing, markets. This shift in investment focus fosters and incubates new channels of political interdependency that, in times of crises, may leave Western markets without the support from Arab capital they had in 2008, a dynamic which is unpacked in this chapter.
