When is $300 billion not enough? That question is key to Qatar's future as some bankers and hedge funds speculate the super-rich state's vast financial reserves may not be liquid enough to defend its currency in the long term.
Nobody doubts Qatar has a lot of money to resist economic sanctions imposed on it early last month, when Saudi Arabia and three other Arab states cut diplomatic and transport ties.
Central bank governor Sheikh Abdullah bin Saud al-Thani said last week that Doha could employ about $340 billion of reserves: some $40 billion plus gold at the central bank, and $300 billion at the Qatar Investment Authority, the sovereign wealth fund.(For graphic on Qatar Investment Authority's largest M&A deals click tmsnrt.rs/2uZ0vit)
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That suggests Qatar could cope comfortably with any capital flight due to the crisis. Bank of America has predicted $35 billion of outflows from the banking system within a year if other Gulf Arab states pull out deposits and loans.
But Qatar could face larger net outflows if, for example, prices of its natural gas exports slump again.
The issue is that it might only be able to use a fraction of its reserves to defend its currency.
Some are domestic assets which could be hard to sell to foreign buyers in crisis conditions, while another portion is tied up in "illiquid" foreign assets that could not be sold quickly to raise cash.
The portion in foreign bank accounts, tradable bonds or listed equities that could be liquidated quickly and easily if needed, is a state secret -- and that secrecy is fuelling speculation about Qatar's real financial strength.
A source close to the government told Reuters fewer than a dozen people had access to all details of the QIA's reserves. The QIA did not respond to a request for comment.
"There is basically no information. There is a lot which is hard to sell, either because of size, strategic interest or depressed values," the source said.
The central bank's net international reserves including gold totaled 126.7 billion riyals ($35 billion) at end-May, official data shows. Sheikh Abdullah said under $6 billion left Qatar in the past month; this implies the reserves could now be near $30 billion.
Economic theory suggests maintaining the riyal's peg to the dollar would require central bank reserves equivalent to Qatar's monetary base -- $17 billion. So the central bank may have some $13 billion to play with.
That implies the QIA may need to liquidate a small fraction of its assets fairly soon to rebuild central bank reserves.
The $300 billion figure for QIA assets given by Sheikh Abdullah looks reasonable to many analysts. It is near the $320 billion estimated by the U.S.-based Sovereign Wealth Fund Institute, which tracks the industry through public sources and contacts with officials and businessmen.
It is also in line with macroeconomic data on Qatar's build-up of wealth. Adding Qatar's current account balances since 2000, when it began posting big surpluses due to its gas exports, and assuming an annual investment return of 3 percent on that money gives a total above $300 billion.
Earlier this year the QIA transferred over $30 billion of domestic equity holdings to the finance ministry. A Reuters review of its remaining domestic assets, including real estate arm Qatari Diar and Qatar Airways, suggests they could be worth around $50-75 billion -- potentially leaving about $225 billion in foreign assets.
The question for financial markets is how much of that sum is liquid and how much is in long-term assets such as London's Harrods department store and a stake, bought for $622 million, in the owner of New York's Empire State Building.
QIA stakes in big, listed Western firms, such as a roughly 15 percent holding in Volkswagen (VOWG_p.DE), may be partially liquid; they could easily be trimmed by sales into the stock market, but divesting them completely without driving down stock prices could take many months.
Krisjanis Krustins, associate director at Fitch Ratings, said Fitch's impression from meetings with Qatari authorities was that only 10-15 percent, or at most 20 percent, of QIA money was in illiquid assets such as private equity or real estate.
That could mean the QIA has roughly $180 billion of liquid foreign assets -- in line with an estimate by a Western diplomat monitoring Qatar, who mostly used public information sources.
But there are some reasons to think the QIA, with its appetite for foreign trophy assets, may be less liquid than other sovereign funds.
U.S. Treasury data shows Qatar's holdings of long-term U.S. securities such as Treasury bonds at $8.6 billion in April, or under 3 percent of QIA assets. Kuwait's holdings were $203 billion, or 39 percent of its sovereign fund's estimated size, and Saudi Arabia's at $155 billion or 30 percent.
The data may understate Qatari investment in liquid U.S. securities if some is routed through offshore centers such as the Cayman Islands.
But the uncertainty suggests Qatar's financial ammunition may not be as plentiful as it appears, argue some hedge fund managers in New York and London, who could gain from market volatility if Qatar's currency does come under pressure.
"Let’s assume 20 to 30 percent of the QIA's foreign assets are liquid -- that brings liquid assets down to $50-75 billion. All of a sudden, Qatar’s capacity to defend the peg isn’t that strong anymore," said a manager in New York.