UAE - Shaikh Muhammad Bin Rashed Al-Maktoum.

Since becoming UAE Vice-President and Prime Minister in January 2006, Shaikh Muhammad bin Rashed has been more busy with federal affairs than with matters pertaining to his emirate. But as he has been an ambitious businessman as well as a ruler, having controlled Dubai long before his elder brother died in January 2006, Shaikh Muhammad bin Rashed has proved to be exceptional among Arab rulers in delegating powers - both for the running of Dubai and handling the more complex affairs of the UAE (see UAE who's who in Diplomat's fap4bbUAE-1-Oct31-05; fap5bbUAE-2-Nov28-05; fap6bbUAE-3-Dubai&OthersDec26-05; fap1-UAE-4-DubaiDemoJan16-06, fap2-UAE-5-DubaiP&OFeb27-06; and fap3-UAE-6-USislamFederalGovt-Mar27-06).

The domestic motor fuel markets in the UAE have been unified somewhat by a committee which decides on local prices. This committee was formed after local fuel retailers and the UAE's Emirates General Petroleum Corp. (Emarat) faced huge losses as a result of rapid crude oil price increases in 2005.

This "UAE Gasoline Retailers' Committee" on May 30 raised the diesel price from Dh8.70 to Dh8.90 per gallon. It was the fourth hike in three months. However, some fuelling stations have gone a step further to charge Dh9 per gallon, according to a press report in Dubai on May 31. The committee, including Abu Dhabi's retailer ADNOC-FOD, Dubai's Emirates National Oil Co. (ENOC), and Emarat. The local press did not comment on the possibility of increasing gasoline prices. ENOC's CEO Hussein Sultan, of a prominent Dubai family, recently said his Dubai state-owned company was losing Dh4.5 per gallon in gasoline, or Dh1.62 billion a year.

As UAE Prime Minister Shaikh Muhammad bin Rashed has allowed - or has not been an obstacle to - the emergence of new petroleum companies to operate in the UAE and abroad. It is said the ruling al-Nahyan family of Abu Dhabi has been behind some of these companies.

The most prominent among these is Aabar Petroleum Investments Co. (PJSC). This is an Abu Dhabi-based public joint-stock company incorporated in March 2005 and is the first publicly listed company in the petroleum sector in the region. Among its founders are 25 local companies and businessmen, including members of the Nahyan family (see Abu Dhabi who's who in APS Review Vol. 64, No. 4, from omt4AbuDwho'sJan24-05), and government bodies. Among the founding partners are the Abu Dhabi state-owned Abu Dhabi Investment Co. (ADIC) and the diversifying Mubadala Development Co. (MDC), as well as the powerful firm The National Investor (TNI) which is Aabar's top financial adviser, lead manager and book-runner on Aabar's initial public offering (IPO) of 55% of PJSC's AED900m capital - with the other 45% having been subscribed to by the founders. TNI's adviser providing services to Aabar since early 2005 is Deutsche Bank.

With the new company headed by Suhail Fares al-Mazrou'i - who formerly served as CEO of the state-owned Abu Dhabi National Oil Co. (ADNOC) and secretary-general of the Abu Dhabi Supreme Petroleum Council (SPC) - Aabar's IPO was in late 2005 over-subscribed by about 800% on the Abu Dhabi Securities Market (ADSM). That was mainly because Aabar on Nov. 17, two days after it had made its debut on the ADSM, had issued a press release projecting its first-year net profit of more than AED600m - in effect, Aabar later reported an end-2005 net profit of AED608m (US$165.6m) - and partly because IPOs had become a rare opportunity for GCC nationals to get rich overnight. But some of the bubbles burst recently causing poorer GCC people huge losses (see New Service of this week's Diplomat Package in news23-gccStockCrash-Iran-Jun5-06).

Other factors behind Aabar's phenomenal success included the following: high world crude oil prices and big profits being made by petroleum services companies; the role of key al-Nahyan shaikhs behind PJSC; its quick acquisitions of highly profitable assets locally and abroad; and in early April 2006 the company announced through the media that all non-UAE nationals were allowed to own shares in PJSC.

Aabar, Arabic for wells, is a petroleum services and E&P company slated to grow rapidly through onshore and offshore operations in the UAE and overseas, having acquired the UAE-based Dalma Energy firm specialised in petroleum field services. In early 2006, Aabar moved quickly to acquire assets abroad. On Jan. 28 it acquired the 48.29% stake of Austindo Group of Indonesia in Singapore-based petroleum services company Pearl Energy Ltd (PEL) at the price of US$1.95 per share, valuing the latter company at about US$865m. The acquisition was worth S$418m (US$256m). And on March 30 Aabar announced that it was offering to buy all the remaining PEL shares so that the latter would become its fully-owned subsidiary. On April 6 Aabar said through the media that all non-UAE nationals could own shares in PJSC.

0n April 8 foreign nationals began trading in Aabar shares on the ADSM in a big way. Aabar's popularity on the ADSM rose further when the company said it was to de-list PEL from the Singapore Exchange. Adding yet more to the popularity of Aabar were rumours that PJSC was going to compete seriously with National Drilling Co. (NDC), which hitherto has been monopolising the drilling business in the region.

PEL has become a highly profitable company. PEL has nine contract areas in Indonesia, Thailand and the Philippines. It is producing about 13,000 b/d of oil and will help Aabar move quickly into the petroleum (oil & gas) E&P business in various parts of the world.

Mubadala (MDC), a diversified venture capital group backed by Dubai Crown Prince Shaikh Muhammad bin Zayed and his full-brothers, owns 50% of the integrated gas E&P/downstream company Dolphin Energy Ltd (DEL), the other partners being Total (24.5%) and Occidental Petroleum (Oxy - 24.5%). Dolphin is in late 2006 to begin supplying Abu Dhabi, Dubai and Fujairah with natural gas which it will be producing in Qatar's offshore North Field. DEL has a PSA in a portion of the North Field. It will own and run a system of pipelines to carry the Qatari gas to the UAE, to Oman from early 2008, and also to Pakistan later on (see Gas Market Trends in gmt22UAEprodMay29-06).

Mubadada fully owns the local petroleum E&P company Liwa Energy with is Oxy's partner in Libya. Oxy's top management is close to the Qadhafi regime in Libya, where the US major dominated the awards resulting from NOC's first upstream licencing round under the EPSA-IV production-sharing contract, picking up nine of 15 blocks on offer when results were announced in Tripoli on Jan. 29, 2005. Oxy, in partnership with Liwa Energy, then won five blocks, while a Woodside-led group, including Oxy and Liwa, won a further four areas (see gmt1LibGeoJul4-05). Liwa Energy is also investing in Oman's E&P, with Mubadala investing in a huge aluminium smelter in the neighbouring sultanate (see February 2006 survey of Oman in this volume, Nos. 5-8).

Shaikh Muhammad bin Zayed, who chairs the local government of Abu Dhabi as well as being the deputy supreme commander of the UAE armed forces, is a very ambitious man who, like Muhammad bin Rashed, is business-minded as well. He and his full brothers are proponents of clean energy and have been behind the Technical Committee for Reinforcement of Natural Gas. This committee announced on May 10 that 20% of vehicles in Abu Dhabi will use natural gas as fuel by 2012. These would include taxis, school cars/buses and government vehicles. A sub-committee formed to bolster implementation of cleaner fuel will discuss licencing workshops to convert cars to use gas a fuel and steps to set up gas fuelling stations, now that Abu Dhabi is to receive natural gas from Qatar.

Another firm in Abu Dhabi is CGG specialising in petroleum services. A press report published on May 31 quoted Bertrand Tetrias, a senior manager at CGG, as ADNOC's plan - to increase Abu Dhabi's crude oil production capacity from 2.8m b/d to 4m b/d by 2010 - involved major projects to be offered to oil services companies, and CGG was expecting a major project related to ADNOC "reservoir imaging". Tetrias said oil reserves in Iraq were far greater than the current data reveal. He said: "The technology that has been used to assess Iraq's oil reserves was more than 20 years old. However, we do not have any intention to penetrate Iraq at present, as the security concerns can endanger our operations and add substantially to our costs". CGG was then celebrating its 75th anniversary. Tetrias said the company had major projects in Saudi Arabia, and was planning for a project in Qatar. The Middle East and the Asia Pacific region represent 34.2% of its portfolio.

Sharjah-based Dana Gas was on Dec. 6, 2005, the first regional private-sector gas company to offer shares through an IPO on the ADSM. Its shares were over-subscribed to 140 times. The close of subscriptions for the IPO on Oct. 3 caused an uproar as police were called to deal with angry crowds looking to register their interest in the new firm.

Dana Gas is a spin-off from Sharjah-based Crescent Petroleum. The IPO involved 34.33% of Crescent's stake in Dana, formed to market Iranian natural gas yet to be imported. But there is a gas price dispute between Crescent and the National Iranian Gas Export Co. (see gmt22UAEprodMay29-06). Crescent is controlled by an Iraqi-born business man from the Ja'far family.

Dubai under the Maktoums is more of a family "corporation" than a state. In describing the "corporation". Years Before the sudden death of Dubai ruler Shaikh Maktoum bin Rashed al-Maktoum in early 2006, one British expatriate had said the Maktoum brothers functioned as follows: Shaikh Muhammad, the third and most favoured son of the late Shaikh Rashed, was "the CEO". Shaikh Maktoum, the eldest, was the "chairman". Shaikh Hamdan is "the chief of the landed gentry" as well as the treasurer. Shaikh Ahmad, the youngest of the four and in charge of security, is "the playboy" who is often abroad.

Shaikh Muhammad bin Rashid had been the crown prince of Dubai since late 1990 and UAE defence minister since the early 1970s. He remains the day-to-day ruler of the emirate. Chairing the most vital departments, he controls all the sectors in Dubai but through long-trusted aides, and directs the family's lucrative horse-breeding business. He got the post as federal defence minister in the 1970s as a counter-weight to that of then Abu Dhabi Crown Prince Shaikh Khalifa bin Zayed, who was the deputy supreme commander of the UAE armed forces (see background in Vol. 62, No. 22).

Shaikh Muhammad holds the rank of general. As UAE vice-president and prime minister, he is a close ally of Shaikh Khalifa bin Zayed, who became Abu Dhabi ruler and UAE president upon the death of Shaikh Zayed bin Sultan al-Nahyan in early November 2004. Muhammad bin Rashed he treads cautiously in Abu Dhabi, weary of a potential power-struggle with Crown Prince Muhammad bin Zayed, who is deputy supreme commander of the UAE armed forces.

Shaikh Muhammad was behind the Jebel Ali free zone, Emirates Airline and almost all other big projects in Dubai, a city which he has planned to house up to 3 million people eventually. He was behind the plan, launched at the beginning of 1997, to raise the non-oil sectors' contribution to Dubai's GDP from 81.2% in 1996 to 100% by 2015. He is the chairman of the Dubai Economic Development Departmentr.

Shaikh Muhammad has been behind many annual events held in Dubai and attracting a huge number of people, such as the international air shows, conferences and exhibitions, the famous annual Dubai Shopping Festival, etc. Extensive facilities for such events and a plethora of five-star hotels - the amazing Burj al-Arab which is the world's most luxurious hotel with the world's most expensive suites, is one example - have attracted high profile meetings to Dubai. The annual IMF/World Bank meetings were held in Dubai in September 2003.

On Jan. 27, 2000, Shaikh Muhammad issued an order granting all GCC nationals "the same rights and responsibilities to practice trade in the emirate as those enjoyed by UAE citizens". Previously no non-UAE national could hold a general trade licence in Dubai; and GCC nationals were limited to owning one commercial and one residential property. The edict implied regulations covering company ownership could be changed. Until then non-UAE nationals could not own more than 49% in limited liability companies.

Shaikh Muhammad can be tough and still can reach anyone in Dubai, though now he is busy as UAE prime minister. On Feb. 20, 2000 he dismissed the entire management of Dubai courts as, after a surprise visit, he found offices empty and managers absent. The director of the criminal laboratory at Dubai police HQ was also sacked. After his tour, he issued a warning to staff at all government departments, ordering them to abide by official working hours and improve performance. He issued a final warning to the assistant undersecretary at the defence ministry for having been absent from his office before 9.30 am.

Having made the world's free trade Internet City a reality a year later, Shaikh Muhammad said on Oct. 29, 1999: "My vision is very simple. In the future, all commercial action will be in cyberspace. But the cyber world will need a ground base on this physical world...and I want Dubai to be the best physical location in the world for any and every virtual company". Among incentives there are 100% foreign ownership and 50-year renewable land leases at low prices, together with blanket exemption on taxes. This zone houses an internet university and a research and development centre.

He would not stop there, as Shaikh Muhammad rules Dubai through the world's first e-government. This is optimising the day-to-day operations of government departments and giving the residents easy access to public services. Since late 2001, all departments have implemented the initiative which hinges on synergy between government and the private sector. Residents can apply for driving licences, IDs, work permits and trade licences through the internet. Likewise they can file complaints, use credit card numbers to pay their dues, and so forth.

Shaikh Muhammad has a unique passion for horse racing. He and his brothers have some of the fastest thoroughbreds in the world. They have controlled British horse-racing for more than 18 years. Their lucrative racing interests extend to Australia, where his eldest brother Shaikh Maktoum died in early January 2006, and the brothers are described as the world's most dominant thoroughbred owners. The al-Quoz racing stables are located near Jebel Ali in a cluster of inconspicuous buildings with whitewashed walls and mud-red tiled roofs. The stables now only house some of the finest thoroughbreds in the world, but they are also the headquarters of Godolphin - the Muhammad-inspired racing operation.

After having started up horse-racing in Dubai, Muhammad has moved the horses which did not measure up in England to the Dubai stables since 1993. This has affected horse-racing in Australia. In 1998 he criticised the stud conditions in Britain and hinted he would move the family business out of the UK. This caused a major sensation in Britain, where a big part of the business depends on the Godolphin operations.

In early 2002 London's five-star Hyatt Carlton Tower, part of Muhammad's business empire, came under the management of his Jumeirah Int'l chain of hotels - as the US group Hyatt's 20-year contract to run the 220-room hotel expiring at end-2001 was not renewed. It became the first Jumeirah hotel outside the UAE, where he has built a portfolio of several luxury hotels, a water park and a hospital academy. With his chain including Burj al-Arab, the world's tallest hotel in the shape of a sail - a very expensive enterprise to run, which he gave to Shaikh Zayed as a present - Jumeirah Int'l is on its way to owning and managing a big number of luxury hotels on both sides of Suez.

The Muhammad bin Rashed Techonology Park is one of his projects built on a 3-sq-km site adjacent to Jebel Ali Free Zone (JAFZ). This provides inter-national companies with R&D presence in the region - starting with technologies in water desalination, treatment, energy, oil and gas exploration and insulation. The park's CEO, Shihab Ghanem, is one of Shaikh Muhammad's aides. The park's soft opening took place in 2003. Companies wishing to set up there can build their own facilities under 50-year leases, and the park provides the basic infrastructure.

In March 2002 Shaikh Muhammad made one of this sons, Shaikh Maktoum bin Muhammad, head of the board of directors of another free zone called Dubai Technology, e-Commerce and Media City. Under him are Abdel Hamid Jum'a, CEO of Dubai Media City; and Omar bin Sulaiman, CEO of the Dubai Internet City. The latter are members of the board, along with Vice Chairman Hashem al-Dabal, Ahmad bin Byat and Sa'id al-Muntafeq.

Bin Byat in March 2002 became the free zone's director general, replacing Muhammad al-Gergawi - very close to Shaikh Muhammad who was then made secretary-general of Dubai's Executive Council (government).

When Shaikh Muhammad formed the new UAE government in 2006 he made Gergawi federal minister of state for cabinet affairs. Thus Gergawi became the key man in setting agendas for UAE cabinet meetings and for speaking on behalf of the federal government - with the UAE no longer having a ministerial portfolio for the information sector.

Two sons of Shaikh Muhammad, Rashid and Hamdan, attended Sandhurst for one year.

Born in 1949, Muhammad bin Rashed received a military education from the Mons Officer Cadet Training College and Sandhurst in the UK. He also studied at Cambridge. He began his career as director of the police and public security in Dubai before the UAE was created. He founded a 6,000-strong army for Dubai. He became UAE minister of defence in 1972.

Before the almost sudden oil boom and huge flow of capital to Dubai in the wake of the US invasion of Iraq in March 2003, Shaikh Muhammad had been worried since 1997 that, despite the glitz and glitter which characterised Dubai, financially the emirate had been barely breaking even. It was doomed to spend and expand in luxury. To cut costs, in late 1997 he got Dubai's army to be integrated into the federal system of Abu Dhabi. But there was a trade- off, as Muhammad asked for and got the following:

1. Then Abu Dhabi Ruler and UAE President Shaikh Zayed agreed for his emirate to provide Dubai with natural gas by pipeline as from June 2001 at the specially low price of $1/m BTU. Dubai was running short of gas to supply energy for new development and the situation was getting very serious. In return for this, the UAE Offset Group (UOG), a brainchild of Shaikh Zayed's favourite third son Muhammad bin Zayed who then was the deputy crown prince of Abu Dhabi the UAE chief of staff, later launched a huge Dolphin project to develop natural gas in Qatar and import it to Abu Dhabi, Dubai, the rest of the UAE, as well as to Oman, Pakistan and India. This gas should replace Abu Dhabi's supplies to Dubai, and DEL will replace ADNOC as the seller.

2. Abu Dhabi was to foot almost the entire bill of Dubai's own defence, thus cutting huge costs which until 1997 used to be borne by the emirate. After Muhammad bin Rashed secured long-term benefits for his emirate in return for military integration, he has gradually got Dubai's security forces to be integrated into the federal system. He had little to worry since he was to retain his post as UAE defence minister indefinitely.

3. UOG, a high-powered venture capital group formed in 1991 and replaced by Mubadala (MDC) in recent years, getting investment funds from Abu Dhabi's defence suppliers as part of its offset programme, in October 1998 became Dubai's main partner in the new Emirates Basic Industries organisation (Sinaat al-Emarat). This was to invest in major petrochemical ventures and heavy industries in Dubai and elsewhere in the UAE and was to co-ordinate with Dubai Aluminium (Dubal) before launching any similar venture within the union. In return for co-ordination in planning basic industries, to avoid duplication, UOG was to give priority to Dubai in big offset investments.

Muhammed has been, and remains, the effective head of the Dubai Petroleum Department since 1982 and as such he controls the hydrocarbon sector and the related downstream industries. He has acquired wide technical and marketing knowledge of the petroleum business, a complex subject which a few citizens in Dubai could emulate. His key aide in petroleum marketing is a British expatriate, rtd. Brig. Barclay, who works from his UK home most of the time.

"The Boss", as Shaikh Muhammad is known by aides, has keen interest in the financial and business affairs of Dubai, which are the main portfolios of his brother Hamdan. He names the CEOs of businesses which the Dubai government owns or controls. It was at his initiative that Emirates Petroleum Products Co. (EPPCO) was set up in Dubai in 1980 as a products marketing unit. Likewise, Emirates National Oil Co. (ENOC) was set up in 1993 to invest in upstream and downstream ventures. While the upstream ventures are to be abroad, such as its 69.4% stake in Dragon Oil of Ireland which has two oil producing fields in Turkmenistan (see Gas Market Trends No. 21), ENOC's downstream activities are located mainly in Dubai and Fuhairah and has a 120,000 condensate splitter in Jebel Ali on stream since 1999 (see OMT/DT22).