RESTRICTED
REPEATED
то ник
126
123401
HKB 020/26
MDLOAN 4921
+ S. GAMMar
MONETASY AFFAIRS Hih
RESTRICTED
FM FCO
TO PRIORITY WASHINGTON
TELNO
1494
OF 25123OZ AUGUST 90
W
AND TO PRIORITY MIDDLE EAST POSTS, EC POSTS, VIENNA
∞
AND TO PRIORITY BERNE, STOCKHOLM, OSLO, HELSINKI, UKMIS NEW YORK
KUWAIT INVESTMENT OFFICE (KIO)
1.
ADDRESSEE POSTS MAY FIND USEFUL THE FOLLOWING GUIDANCE NOTE FROM HM TREASURY (COMPILED IN CONSULTATION WITH THE BANK OF ENGLAND) ON THE WAY WE ARE TREATING THE KIO:
BEGINS
THE KIO IS THE OPERATING ARM IN LONDON OF THE KUWAIT INVESTMENT AUTHORITY WHICH IS A PUBLIC CORPORATION WITH AN INDEPENDENT LEGAL EXISTENCE, IS WHOLLY OWNED BY THE STATE OF KUWAIT AND ACTS AS ITS AGENT. THE KIA IS CHAIRED BY THE KUWAITI MINISTER OF FINANCE.
THE FUNCTION OF THE KIO IS TO MANAGE A MAJOR PART OF THE QUOTEFUTURE GENERATIONS' FUND UNQUOTE, WHICH WAS ESTABLISHED IN 1976 BY THE STATE OF KUWAIT, AND OTHER ASSETS ON BEHALF OF THE STATE OF KUWAIT. ALL ASSETS MANAGED BY THE KIO ARE OUTSIDE THE STATE OF KUWAIT.
THE KIO OPERATES ON A WORLDWIDE BASIS FROM ITS SOLE OFFICE IN LONDON. ALL INVESTMENT AND OTHER DECISIONS RELATING TO THE OPERATION OF ITS BUSINESS ARE TAKEN BY THE MANAGEMENT OF THE KIO IN LONDON UNDER ONLY VERY GENERAL GUIDELINES GIVEN BY THE KIA.
THE KIO IS REGARDED AS RESIDENT IN KUWAIT, AND IS THUS CAUGHT BY THE TREASURY DIRECTION FREEZING KUWAITI ASSETS. THIS IS STATED IN PARAGRAPH 7 OF THE BANK'S GUIDANCE NOTICE OF 7 AUGUST. THE EFFECT OF THIS IS THAT PERMISSION IS REQUIRED FROM THE TREASURY OR, ON ITS BEHALF, THE BANK BEFORE A UK PERSON CAN CARRY OUT ANY ORDER FROM THE KIO INVOLVING THE MOVEMENT OF FINANCIAL ASSETS.
HMG'S APPROACH HAS BEEN TO SEEK TO MINIMISE THE ECONOMIC COST OF THE FREEZE TO LEGITIMATE KUWAITI INSTITUTIONS, CONSISTENT WITH THE UN RESOLUTION. THE TREASURY AND THE BANK HAVE THEREFORE SOUGHT TO ESTABLISH ARRANGEMENTS WHICH WOULD ENABLE THE KIO TO CARRY OUT ITS ACTIVITIES IN THE LONDON FINANCIAL MARKETS IN AS NORMAL A FASHION AS POSSIBLE, WHILE ENSURING THAT THE ASSETS WERE
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