Kuwaitis Plan Rebuilding

`BUSINESS as usual'' is a phrase commonly used by managers of Kuwait's enormous financial and commercial interests, now forced to operate offshore while the war in the Gulf goes on. In an apparent sign of confidence and determination, plans are being laid to rebuild Kuwait and put it back in business as one of the world's largest oil producers. The Kuwait authorities are reported to have printed fresh dinar banknotes, ready for issue as soon as the Iraqis leave.

But behind the scenes, as the battle-damaged emirate's huge wealth continues to be administered in other world capitals, notably London, a political struggle is developing. It is pitting members of the ruling al-Sabah family against powerful indigenous democratic groups determined that once Kuwait is liberated, the kingdom will cease to be an autocracy.

The ``constitutionalists'' differ also with the al-Sabahs over how Kuwait's accumulated wealth should be invested. The royal family, led by Sheikh Jaber al-Ahmed, the emir, want heavy investment in Western companies to continue. Their critics say the emphasis should switch as quickly as possible to funding the reconstruction of Kuwait itself.

Internationally, there are fears among bankers that if the emirate's wealth is liquidated too rapidly, many foreign companies in which Kuwait has a stake will be adversely affected.

Since Iraq's seizure of Kuwait last August there have been accumulating signs of a tug-of-war between the al-Sabahs and a technocratic elite for future control of the country and the wealth it possesses.

The London-based Kuwait Investment Office (KIO) is the main battle ground. It administers a large chunk of the country's estimated $100 billion foreign assets. For years before the Iraqi invasion, Kuwait salted away 10 percent of its petroleum earnings against the day when oil ran out. The money was placed in a ``Reserve Fund for Future Generations.'' The KIO handles the RFFG.

Over the last decade, earnings from Kuwait's overseas investments were higher than from oil revenue.

Difficulties at the KIO began to develop soon after Iraq's Aug. 2 invasion. Members of the ruling family began arriving in London and made it clear that they wanted to play a more hands-on part in running the KIO. Early in January, 12 mid-level executives resigned in protest.

A British banker who does regular business with the KIO described the atmosphere in its cramped London office as ``still simmering.''

John Roberts, of the magazine Energy Compass, considers that the technocrats see themselves as Kuwaiti nationalists who must take account of democratic forces.

``They view the recovery of Kuwait as their top priority, and they want the immense wealth that has been piled up down the years plowed into reconstruction. The al-Sabahs, by contrast, are a feudal family who regard Kuwait as a piece of real estate and can't see what is wrong with doing with it as they please.''

He adds: ``In the long run you will see a very serious struggle between the constitutional forces who want to see Kuwait with a democratic form of government, and the ruling family.''

While the struggle for longer-term control of Kuwait's assets deepens, there are plenty of signs that the Iraqi invasion has done remarkably little damage to the foreign assets themselves.

Christopher Keen, general manager of the United Bank of Kuwait, said: ``Since the invasion we have adapted and have been able to trade profitably from month to month. Since August our balance sheet is down by only 15 percent in overall size.''

Anticipating the liberation of Kuwait, British and American construction firms have begun forming joint ventures in the hope that they will win contracts for some of the estimated $40 billion that will have to be spent on restoring basic amenities such as roads and water service.

Trafalgar House, a large British construction consortium, has agreed in principle to work with Kaiser, the US engineering group, to bid for water supply contracts when the war is over.

The Kuwait Petroleum Corporation in London, confirmed last week that construction of new oil tankers was going ahead as planned. Much of KPC's existing tanker fleet has been chartered to other companies and is now carrying crude produced by other OPEC countries.

None of this, however, is likely to solve the dilemma faced by the KIO once the moment arrives to begin rebuilding Kuwait.

A City of London banker said a balance had to be established between drawing down Kuwait's assets in favor of reconstruction, and keeping the KIO's investments worldwide at a level sufficiently high to retain confidence on the part of international markets.

The banker went on: ``If the Kuwaitis get the balance wrong, many big companies around the world will feel the impact of the error. The political struggle has its direct reflection in argument over how the financial balance should be struck.''

As examples of Kuwait's involvement in large foreign ventures, the banker noted that it has a 10 percent stake in British Petroleum and owns 5 percent of the Midland Bank, one of Britain's ``big four.''

In Germany, Kuwait owns a significant chunk of Daimler-Benz and the chemical giant Hoechst.

So far there is no sign that Kuwait intends to liquidate these assets on a large scale, but bills for the country's contribution to the Gulf war have yet to come in, and the same certainly applies to the cost of rebuilding Kuwait once the war is at an end.