10 Nov 2017 - 0:20
Exposed: UAE planned to wage financial war and steal FIFA 2022
Leaked documents have exposed a plan of the United Arab Emirates to wage financial war against Qatar and steal the 2022 World Cup from the country, said news organization- The Intercept. The plan was found in the task folder of an email account belonging to UAE Ambassador to the United States Yousef Al Otaiba and subsequently obtained by The Intercept.
One of the plan’s stated aims is forcing Qatar to share soccer’s 2022 World Cup, according to the outline. The strategy laid out in the document calls for using a public relations campaign to point the international soccer body FIFA to Qatar’s dwindling cash reserves, which they expected to fall, and making a case that the country can’t afford to build the necessary infrastructure.
The outline concludes with the hope that the economic war will make it harder for Qatar to continue building stadiums and other assets needed to host the games: “If Qatar now spends its reserves on protecting the currency and domestic credit markets, there is less dry powder to fund the infrastructure spending.” The UAE, according to the document, hopes to make a push for the Gulf Cooperation Council to host the premiere global sports event across the member nations, rather than in Qatar alone. On October 20, several weeks after The Intercept first obtained the document outlining the plan, a well-funded Twitter campaign launched with the goal of taking the World Cup from Qatar, complete with a slickly produced video. “An appeal to FIFA will be to display football as a tool to stabilise the region,” the document reads. “The GCC can petition FIFA to grant the tournament to the region as a whole.” If Qatar rejects the idea, the plan contends, “they will be seen unwilling to work with their GCC partners” — one of which would have just launched a surreptitious financial attack against the country.
The plan of economic warfare involved an attack on Qatar’s currency using bond and derivatives manipulation. The plan, laid out in a slide deck provided to The Intercept through the group Global Leaks, was aimed at tanking Qatar’s economy, according to documents drawn up by a bank outlining the strategy.
The outline, prepared by Banque Havilland, a private Luxembourg-based bank owned by the family of controversial British financier David Rowland, laid out a scheme to drive down the value of Qatar’s bonds and increase the cost of insuring them, with the ultimate goal of creating a currency crisis that would drain the country’s cash reserves.
Rowland has long had close relationships with UAE leadership, particularly with Abu Dhabi Crown Prince Mohammed bin Zayed, known as MBZ.
The bank is currently in the process of creating a new financial institution in cooperation with the UAE’s sovereign wealth fund, Mubadala, according to contracts and correspondence obtained by The Intercept outlining the terms of the deal. That project is separate from the Qatar operation, but it reflects the close relationship between the bank and the UAE.
The Qatar debt project would be grandiose in its ambitions, reported The Intercept. “Control the yield curve, decide the future,” reads the planning document, referring to a standard financial-industry graph showing a country’s borrowing costs for debt that is due at different dates. The height and shape of the yield curve is thought to be a reflection of how healthy an economy is and influences what financing options are available to a country.
The Intercept reached Edmund Rowland, David’s son and CEO of the UK branch of Banque Havilland and asked about the status of the plan to short Qatar on behalf of the UAE, referencing the document. “We’ve never done anything,” Rowland said. Asked for more details, Rowland responded, “I can’t make any comment,” and hung up.
After the call with Rowland, Herbert Kozlov, a lawyer with the firm Reed Smith, reached out to The Intercept and said on behalf of the bank that it had not traded in Qatari bonds or credit default swaps, the financial products the plan proposed to use. “Banque Havilland does not trade in bonds, securities, CDS, or any other instruments of Qatar and it has no plans to do so,” Kozlov said, reading a statement. As for the plan to take down Qatar, he said, “The bank is a prestigious private banking group and will not be drawn into or make comments on what are political storylines.”
Documents marked “secret and confidential” outlining the plan for the financial attack against Qatar were being circulated between Banque Havilland and the Emirati embassy in Washington as recently as late September.
A Private financial institution like Banque Havilland would be very familiar with the first step of the plan as laid out in the outline: creating a new offshore investment fund constructed to obscure its links to the UAE. The fund would hold Qatari bonds already owned by the UAE, as well as additional debt the fund could buy. The fund would also buy credit default swaps, which would rise in value as Qatari debt sank.
The plan then calls for precipitating a run on the debt through a series of sham transactions to drive down the price of Qatar’s bonds – a manipulation technique known as “painting the tape,” where players swap instruments back and forth to create the false appearance of a high volume of trades.
The hope is to get other traders who aren’t in on the plan to see the high volume on the “tape” — the market ticker — and think that, since volume is high in a period of political turmoil, something important must be happening, prompting them to sell. The sales, if the technique goes to plan, would drive the price of the bonds down, creating more panic and more selling. According to the plan, the UAE, having bought credit default swaps against the debt, would see the value of that insurance rise as Qatari debt tanked.
The document outlining the scheme puts the bond trading proposal in print: “Establish a crossing transaction arrangement whereby another affiliated party sells the same bond holdings back to the original seller and thereby creates additional downward pressure.”
The hope is to spark a run by bond investors who think everybody else is selling, so they better get out quickly.
Falling debt prices and rising costs of the default swaps would signal a fresh crisis to the markets, putting pressure on Qatar’s currency. The Qatari riyal is pegged to the US dollar, so as its offshore value falls, the country would be forced to spend billions of dollars from its reserves to push it up. As the document notes, at the end of the operation — if it’s successful — it will be difficult for the UAE to unload its Qatari bonds because the attack would have largely weakened Qatar financially. If all goes according to the plan, the next move would be to force Qatar to blow through its cash to prop up its currency. “Maintaining the peg requires extensive use of central bank foreign exchange reserves,” reads the outline’s mission statement. The idea would be that as the Qatari bond market tanks, so will the country’s currency. And as holders of Qatar’s currency sell it off and exchange it for dollars, the country’s dollar reserves plummet. The third stage of the plan would be to ramp up the “PR machine” in order to slam Qatar internationally, pointing to its weakening financial situation. “Focus on the prospect of restricted access to US Dollar and now-doubtful stability of the country,” the plan reads. “And … continue to increase positions.” In other words, keep the market cornered and feed fears about falling prices with manufactured bad news. The public relations effort also calls on other countries for help — presumably UAE allies, like Egypt and Saudi Arabia
The documents were provided to The Intercept by an opaque group that calls itself Global Leaks.