Domestic Sources of Twenty-first-century Geopolitics: Domestic Politics and Sovereign Wealth Funds in GCC Economies

ABSTRACT

The present article brings domestic politics into an analysis on sovereign wealth funds (SWFs) that are relevant for the study of contemporary geopolitics. What are the domestic drivers behind SWF creation, and how does a country’s domestic political environment affect the creation of these funds? Using a comparative historical case study on sovereign funds in Gulf Cooperation Countries, this article investigates the effects of domestic state–society structures on decisions about SWF creation and their evolving structure. Thereby, this article adds to an emerging stream of literature that looks at the drivers and implications of SWFs. One of the key findings of this analysis is that there are systematic links between the sovereign fund types and domestic structures; these structures include and exclude socio-economic actors that influence policy-making decisions.

KEYWORDS:

• Sovereign wealth funds
• state-society structures
• policy making

Acknowledgements

The author would like to thank Steffen Hertog, Mark Thatcher, Robyn-Vidra Klingler, Asim Ali and the anonymous referees for helpful and insightful comments on earlier versions of this paper.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes on contributor

Juergen Braunstein is a post-doctoral fellow at the Harvard Kennedy School. His areas of expertise include geopolitics of renewable energy, green infrastructure financing, geo-finance and sovereign wealth funds. Juergen is currently finishing a book on the politics and the variation of sovereign wealth. He has a B.A. from the University of Vienna and a masters and doctorate from the London School of Economics and Political Science.

ORCID

Juergen Braunstein http://orcid.org/0000-0002-7692-2648

Notes

1. For an excellent overview on contemporary geopolitics, see O’Sullivan (2017).

2. One exception to this is Pekkanen and Tsai (2011).

3. These points were specifically highlighted by representatives from private Kuwait finance houses such as KFH Investment and the chairman of the Kuwait Economic Society (Anonymous, personal communication at the LSE Kuwait Programme Workshop in Kuwait, 22 September 2014).

4. Until the mid-1970s, the Kuwait Oil Tanker Company was fully owned by Kuwait’s private sector (KOTC 2015). Kuwait National Airways was founded in 1954, but the government only took full ownership only in 1962 (Kuwait-Airport 2015).

5. Up until 2013, Abu Dhabi disposed of at least three SWFs with development mandates including the International Petroleum Investment Corporation (est. 1984), Mubadala (est. 2002) and the Abu Dhabi Investment Council (est. 2007).

6. In 1977, the state allocated around 35 per cent of its total budget to industrial development, but by 1978, the share had declined to 23 per cent (El-Mallakh 1979: 69). During this same period, housing expenditures increased from 10.2 per cent in 1977 to 17.8 per cent in 1978 (El-Mallakh 1979: 69).

7. Through his status of the successor, Hamad Al-Thani had already started Cabinet reforms already in 1992 by reshuffling and replacing the old guard with like-minded development-oriented family members (Mehran 2013: 113).