GO
Loading...

How Qatar became Europe’s top power-broker

When in distress, American banks call Warren Buffett. In Europe, banks have turned instead to the Middle Eastern principality of Qatar.

This one-time impoverished British protectorate famous only for pearl-fishing may only be the size of Yorkshire – but Qatar's swoop on Deutsche Bank confirms its role as Europe's number one power-broker, having struck similar deals with Barclays, Credit Suisse, Dexia, KBL and Greece's Alpha Bank.

Lars Baron | Getty Images

Qatar will become Deutsche Bank's largest shareholder, with a stake of around 6 percent, after the German lender announced it was raising €8 billion of new capital ($11 billion), with €1.75 billion coming directly from the Qatari royal family through its Paramount Services Holdings vehicle.

In 2008, Qatar plunged £6.1 billion into Barclays – Europe's only other global investment bank – at a time when there was a very real possibility that the U.K. government would bail it out. The agreement, which was structured with a series of complex warrants, earned the gas-rich country a massive return, estimated at around £1.7 billion. It also sparked controversy, leading to an ongoing investigation by both the Serious Fraud Office and the UK market regulator into fees paid during the emergency cash call, in which Qatar deny any wrongdoing.

Read MoreDeutsche Bank sees 'tectonic plate shift' in banking

But Qatar is unlikely to replicate the bargain it did with Bob Diamond in Germany. Not least, because the Deutsche Bank arrangement is rather vanilla in comparison, with only straight shares being sold at a discount. However, with the German lender trading below 0.8 percent tangible book value there is significant upside to be gained after Europe's summer of stress tests has come to a close.

In any case – Qatar's ascension to gas power giant, has transformed what it wants out of its deals. Sure, it is trying to insure against the finite nature of revenues from the 26 trillion cubic meters of gas it is sitting on. But with per capita income at $83,000 - second only to the banking enclave of Liechtenstein – the timelines are so long dated that what it gains politically is as vital as what it does financially.

After the Glencore-Xtrata merger, where Qatar forced Ivan Glasenberg to increase his offer for Xtrata, the value of Qatar's stake more than doubled. The tough negotiating stance did a lot to counter the popular viewpoint that Qatar's deep pockets meant that it was rather careless with its billions.

However, insiders admit that those negotiations were as much to do with power as they were with price.

Read MoreQatar royals to take major stake in Deutsche Bank

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 oil majors Royal Dutch Shell and Total, have helped elevate Qatar into Europe's most critical shareholder in almost all vital industries.

Germany may remember Qatari ownership from deals like Volkswagen-Porsche, where the kingdom helped push the merger through the merger from a 17 percent stake in VW. But it is all of Europe that now has to sit up at pay attention.

Symbol
Price
 
Change
%Change
DBK
---
BARC
---
CSGN
---
DEXB
---
ALPHA
---

Featured

Banks