Report: Gulf Sovereign Funds Lost Big

By Adam Schreck

Dubai, United Arab Emirates -- Gulf Arab governments' funds are billions of dollars poorer despite record oil prices because of losses in stocks and other investments, a report due out Wednesday said.

The Council on Foreign Relations' paper also suggests that the world's largest such fund is considerably smaller than some earlier estimates have claimed.

Holdings of that fund, the Abu Dhabi Investment Authority, and another pool of money controlled by the Persian Gulf emirate together shed more than a quarter of their value last year, the report shows.

An ADIA spokesman declined to comment.

The paper, an advance copy of which was obtained by The Associated Press, estimates that the six members of the energy-producing Gulf Cooperation Council saw their holdings shrink by $82 billion to $1.2 trillion in 2008. The trend could continue.

"All these funds now look likely to shrink in 2009, as the price of oil has fallen to the point where many Gulf economies will need to draw on their foreign assets to sustain their current level of imports," authors Brad Setser and Rachel Ziemba wrote. "Estimates of the Gulf's current and future external wealth consequently need to be scaled back."

The declines came even as the group -- which comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates -- pulled in some $300 billion in oil profits, the report estimates.

That is about $70 billion more than they collected in 2007, when oil prices averaged around $70 a barrel rather than nearly $100 as they did last year.