INTELLIGENCE REPORT WORLDWIDE DISTRIBUTION OF OPEC ASSETS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000500200015-0
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 14
• Document Creation Date: December 16, 2016
• Document Release Date: November 9, 2004
• Sequence Number: 15
• Publication Date: May 1, 1975
• Content Type: IR

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Confidential
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Intelligence Report
Worldwide Distribution of OPEC Assets
Confidential
ER IR 75-14
May 1975
Copy N2 156
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Foreword
irus report examines the discernible trends and presents a profile of OPEC foreign
assets at the end of 1974.
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Worldwide Distribution
of. OPEC Assets
Major Trends in 1974 and Prospects for 1975
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1. OPEC foreign official assets reached US $73 billion on 31 December
1974, compared with $21 billion a year earlier (see Figure 1 and Table 1). While
all OPEC states enjoyed a rapid rise in foreign official asset holdings (see Figure 2),
the most dramatic gains were in Iran and Nigeria, where holdings rose by about
650% and 860%, respectively (see Figure 3). Only four producers - Algeria,
Ecuador, Indonesia, and Libya - failed to at least double their foreign asset level
during the year. Of these, only Algeria and Indonesia had holdings equivalent to
less tha-i six months of 1974 imports.
2. With export earnings reaching almost $120 billion and imports, net service
payments, and disbursements of grant-type aid totaling $49 billion, OPEC ran a
$71 billion current account surplus in 1974, which, because of a $13 billion lag
in payments by oil companies, left $58 billion for investment. Our information
on official OPEC foreign assets shows an increase of $52.2 billion in 1974. This
figure appears at least roughly consistent with the estimates of OPEC earnings and
expenditures. After deducting this figure, the remainder of the $58 billion surplus
is only $6 billion, and out of this OPEC would have had to finance several types
of expenditures not elsewhere accounted for. These include prepayments on foreign
debt and compensation for nationalized property.
3. Lacking the financial expertise to handle this rapid buildup, OPEC
governments, by and large, simply allowed new funds to pile up in highly liquid
bank deposits and other safe short-term assets. Even though producers became
increasingly sophisticated during the year and developed stronger relationships with
Western financial institutions, at the end of 1974 OPEC members' $73 billion in
foreign wealth was concentrated in
re welcomed. i ney may or,
of the Office of Economic.
d t
o
directe
Research,
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OPEC Foreign Official Assets ....
? highly liquid assets - about 80% is
accounted for by bank deposits and
government securities;
at the financial markets of the niaior
developed countries - London and New
6.3
30%
York alone account for 60%; and
0.6
3%
6%
? major currencies - ')out 70% is in
2.4
12%
dollars, and sterling accounts for another
6%
10%.
4. OPEC fo::;ign official assets are now
growing slower than last year. Oil export earnings
am declining, while im-or+s continue to grow
rapidly. Although we expect OPEC oil export
volume to increase in the second half of this year,
Figure 2
OPEC Foreign Official Assets,
1973 an! 1974.... .
Billion US $ 73.3
4.5
21%
7?;
22%
5.9
8%
7.0
10%
20.7'
Other
Producers
Saudi
Arabia
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OPEC: Foreign Official Assets
Reserve
Assets
Other
Assets
Total
Assets
Reserve
Assets
Other
Assets
Total
Assets
Total
18,755
2,352
21,107
60,436
12,847
73,283
Algeria
1,143
14
1,157
1,689
14
1,703
Ecuador
241
3
244
350
3
353
Indonesia
807
41
848
1,492
41
1,533
Iran
1,237
25
1,262
8,383
1.093
9,476
Iraq
1,553
9
1,562
3,273
709
3,982
Kuwait
3,700
775
4,475
7,958
2,422
10,380
Libya
2,127
4
2,131
3,616
204
3,820
Nigeria
592
19
611
5,217
19
5,856
Qatar
360
38
398
1,500
150
1,650
Saudi Arabia
3,875
800
4,675
15,764
4,980
20,744
United Arab Emirates
700
600
1,300
3,672
3,128
6,800
Venezuela
2,420
24
2,444
6,902
84
6,986
OPEC export earnings should drop to $109 billion for 1975, or some 10%u below the
1974 level. OPEC imports are expected to grow by 50% this yea:, reaching $55
billion. Net service payments and grant aid disbursements will together total about
$1 2 billion, leaving an investible surplus of about $42 billion and an increase in
off:~.ial holdings of around $38 billion. Consequently, these holding:, are likely to
reach more than $I 10 billion by the end of 197 5.
5. Dramatic changes in the pattern of OPEC foreign investment are unlikely,
but the gradual trend will be toward
? longer term placements in the form of purchases of the debt ant' ?,.quity
of large private and public corporations in the major developed countries;
? more investment in continental Europe, Japan, and Canada and less in
the United Kingdom; and
? somewhat greater diversity in the currency denomination of OPEC
holdings, although the bulk will continue to be dollar denominated.
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.~,.Zr ^xa' -c,..rn s3~ Vr t 1r"".alF s^c.'..C. ~^+
Nigeria
.r.lemn _.o n~ e f ,av'3i,F:`i..uivrrit" a,t 4 +idU.k.L;~
UAE
Saudi Arabia
Qatar
Venezuela
Iraq
Kuwait
Indonesia
Libya
Algeria
Ecuador
Percent
,?rnn
'$ 858
These trends are already becoming discernible. Saudi Arabia, for example, is already
investing more 'leavily in longer term assets such as equities, corporate bonds, and
notes. Kuwait has also been showing increased interest in equity and real estate
investment. Furthermore, other producers are ?;xpected to increase longer term
investments, especially if short-term rates rem; in below long-term rates.
6. The proportion of total OPEC funds going into longer term investments
is expected to grow as producer wealth becomes increasingly concentrated in the
hands of the three producers - Ira;i, Kuwait, and Saudi Arabia - most active in
long-term investment.
? Iran is interested in acquiring debt and equity in major Western companies
that can aid in developing its economy.
? Kuwait established at least seven special investment accounts during 1974
to help acquire loi,'-t,,rm assets, particularly equities:.
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? Saudi Arabia, cinder the new and less conservative leadership of Prince
Fahd and the iew Governor of the Saudi Arabian Monetary Agency is
now augmenting local expertise by developing stronger relationships with
major Western financial institutions.
7. The share of producer assets invested in the United States will probably
remain near its present level, assuming no deterioration in Arab-US political
relations. We believe OPEC investment in the United States will increase from near',
$15 billion at the end of 1974 to about $24 billion at the end of this year.
Continued high inflation and doubts about the value of sterling will reduce new
investment in the United Kingdom. OPEC investment in continental Europe,
Canada, and Japan is likely to increase somewhat, while placements in other
countries will remain insignificant.
3. The oil producers would probably prefer, but will be hard pressed to
achieve, greater currency diversification. Attempts to increase investment greatly
in major continental currencies would elicit responses in the form of capital controls
or other measures designed to limit inflows from governments unwilling to tolerate
additional currency appreciation or dollar accumulation. Sterling remains available
but unattractive. In sum, the dollar market remains the only one of sufficient
depth and openness to handle the major share of OPEC investments.
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Profile of OPEC Official Foreign Assets, 31 December 1974
The $73 billion in OPEC foreign official assets at the end of 1974 were highly
concentrated in a few countries. Three of the 12 OPEC states held 55% of the
total assets.
? Saudi Arabia held $20.7 billion in foreign official assets, or nearly 30%
of total OPEC holdings.
? Kuwait and Iran held $10.4 billion and $9.5 billion, respectively, or more
than 25% of OPEC wealth.
? Venezuela, the United Arab Emirates (UAE), and Nigeria combined had
25% of the assets, with the remaining 20% split among the other OPEC
states.
Composition
About 85% of foreign official holdings "were in very secure and highly liquid
reserve assets (see Tables 2 and 3). These reserves totaled about $60 billion, or
roughly three-fourths of the combined foreign reserves of the five leading
non-Communist industrial powers - the United States, Japan, West Germany,
France, and the United Kingdom.
? Bank deposits accounted for about 60% of the total assets.
? Another 20% was held in government securities, largely US government
and US agency issues.
? Gold and holdings in the International Monetary Fund (IMF) accounted
for about 5% of OPEC foreign wealth.
About 13% of OPEC's officially owned foreign holdings were nonreserve assets,
such as equities and loans.
? Countries with the greatest capacity to absorb imports, such as Algeria,
Ecuador, Indonesia, Nigeria, and Venezuela, held 5% or less of their
wealth in these less liquid assets.
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OPEC: Foreign Official Assets as a Percent of Total'
31 December 1974
Gold/
Govern-
Other
Total
Total
SDRs/IMF
Position
Bank
`Deposits
ment Se-
curities~
Known
Assets
V
Total
100
85
5
80
15
Minimum amount
in US dollars
70
60
....2
60
10
United States
20
20
Negl.
10
10
Negl.
United Kingdom
Dollars
30
30
....
30
03
Negl.
Sterling
10
10
....
10
Negl.
Other currencies
Negl.
Negl.
....
Negl.
Negl.
Negl.
Continental Europe
and Japan
Dollars
15
10
....
10
5
Other
5
5
....
5
Negl.
IMF
5
5
Negl.
....
Negl.
....
World Bank
5
5
....
....
5
Negl.
Other4
10
5
Negl.
5
5
I. All data are rounded to the nearest 5%.
An ellipsis indicates that no investment is likely.
3. A zero indicates that no investment has occurred.
4. Including $1 billion in short-terry funds held in Nassau until suitabic long-term US invzstments can be
found.
? Even Kuwait and Saudi Arabia, however, maintained no more than 257(
of their holdings in such assets.
OPEC's wealth was predominantly located in the major developed
countries (see Table 4).
? London, including the Eurocurrency deposits held there, accounted for
about 40% of the total, most of which was in bank deposits. Iran, Kuwait,
Nigeria, and Saudi Arabia held 90% of producer investment in the United
Kingdom.
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OPEC: Foreign Official Assets, by Type
31 December 1974
Percent of Total'
Gold/SDRs/
IMF
Bank
Government
Nonreserve
Total
Position
`Deposits
Securities J
Assets
OPEC
100
5
80
15
Algeria
100
20
80
Negl.
Ecuador
100
10
90
Negl.
Indonesia
100
5
90
5
Iran
100
5
70
15
10
Iraq
100
5
65
10
20
Kuwait
100
Negl.
75
25
Libya
100
5
90
5
Nigeria
100
Negl.
1
00
Negl.
Saudi Arabia
100
Negl.
55
20
25
Venezuela
100
10
75
15
Negl.
OPEC: Foreign Official Assets, by Location
31 December 1974
OPEC
Total
100
United
States
20
United
Kingdom
40
Continental
Europe
and Japan
20
IMF/
World
Bank
10
Other
10
Algeria
100
15
30
50
5
Negl.
Ecuador
t00
15
15
5
5
60
Indonesia
100
65
5
10
10
10
Iran
100
15
55
20
10
Nett.
Iraq
100
15
5
40'
Negl.
40
Kuwait
100
15
50
10
10
152
Libya
100
15
Negl.
70
Negl.
15
Nigeria
100
40
55
Negl.
5
Negl.
Saudi Arabia
100
20
40
25
5
10
Venezuela
100
45
15
20
10
10
1. All data are rounded to the nearest 5%.
2. Including $1 billion in short-term funds held in Nassau until suitable long-term US investments can be found.
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? About 20% of OPEC assets were held in the United States; almost half
consisted of US government and US agency securities owned primarily
by Nigeria and Saudi Arabia. In addition, Kuwait held at least $1 billion
in Nassau at the end of the year, pending suitable long-term investments
in the United States.
? About 20% of OPEC's foreign assets were located in continental Europe,
primarily in France and Switzerland, and in Japan.
? Some 10% was held by the International Monetary Fund and the World
Bank.
? The remaining 10% was spread among a number of countries including
Canada. the Middle East, and even some Communist states.
Currency Composition
More than 80% of OPEC's foreign wealth was in dollar- or sterling-denom-
inated assets.
? Dollar-denominated holdings accounted for 70% of the total (see
Table 5). Only Iraq and Nigeria held less than one-half of their foreign
wealth in dollar-denominated assets.
? Sterling accounted for another 10%I- of OPEC wealth. Kuwait and Nigeria
together held 70% of steriing holdings.
? About 15% of OPEC wealth is denominated in other currencies, mainly
German marks and Swiss and French francs.
? Gold and IMF assets, including the IMF oil facility, account for only
5%.
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OPEC: Foreign Official Assets, by Currency
31 December 1974
Total
Gold/SDRs/
IMF
Position
Dollars
Sterling
Other
OPEC
100
5
70
10
15
Algeria
100
20
70
Negl.
10
Ecuador
100
10
85
Negl.
5
Indonesia
100
5
80
Neg1.
15
Iran
100
5
90
Negl.
5
Iraq
100
5
30
5
60
Kuwait
100
Negl.
65
20
15
Libya
100
5
55
Negl.
40
Nigeria
100
Negl.
40
55
5
Saudi Arabia
100
Negl.
80
10
10
Venezuela
100
10
85
Negl.
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