Sultanate of Oman

Paribas takes a stake in the Bank Dhofar Al Omani Al Fransi

Paribas was the first French bank to be granted authorisation to set up a permanent establishment in the Sultanate. The opening of the branch in 1974 was the result of skillful negotiations led by Claude de Kémoularia.

Paribas then participated in a number of development projects in the Sultanate, in tandem with the major advances being made in oil production.

After years of profitable oil production, the recession at the end of the 1980s led Paribas to reorganise the way it was operating in Oman.

On 7 January 1990, the Bank Dhofar Al Omani Al Fransi was founded, taking over all the assets of the Paribas office. Shareholders in the new bank were H.M. Sultan Qaboos bin Said Al Said, the Dhofar International Development and Investment Company and Paribas, which held a 30 percent stake and took on responsibility for managing the bank.

The Bank Dhofar Al Oman Al Fransi became highly active in oil deals in the Sultanate, such as the financing of a capacity increase at the Oman Refinery Company s Al Fahal refinery. Carried out in 1993, with the bank as lead arranger.

In 1992, following a capital increase, Paribas share in the bank dropped to 10 percent. The stake was entirely sold off in 2004.

On 27 October 1972, de Fouchier held a meeting to take stock of Paribas progress in the Gulf States. Branches were about to be opened in Abu Dhabi and Qatar, but he was unsure if they should set up in Kuwait at this time, given the position in the market already attained by Société Générale subsidiary Frabank and Crédit Lyonnais vehicle UBAF. De Fouchier concluded that it would be best to deal with the KIC19, providing it and other local private investors or state bodies with opportunities to invest in tourism and hotel construction.

Paribas deployment

The first oil shock

The first oil shock came in 1973, and was marked by a substantial rise in the price of oil produced by the OPEC20 countries. Two years earlier, the United States had decided to come off the gold standard , ending the convertibility of the dollar to gold and bringing to an end the Bretton Woods system for global finance. The system of fixed exchange rates finally collapsed in March 1973, when free-floating exchange rates were adopted. This caused the US dollar to depreciate heavily and, as international oil shipments were priced in dollars, the earnings of the oil-producing countries declined sharply.

In 1973, the oil-exporting countries therefore moved in concert to raise the dollar price of crude oil. This hike in the price of oil brought about a shock to the global economic system and led to large balance-of-payments surpluses in the OPEC countries. The term petrodollars was coined to describe these huge amounts of capital flowing around the world system. OPEC surpluses totalling US$59 billion in 1974, had risen to US$113 billion by 1980. Just under half of these surpluses were placed on current accounts with banks, and these flows of highly liquid capital were much sought after by Western banks.

Setting up the Bank of Sharjah

The contacts Paribas senior management had made with the Emir of Sharjah, H.H. Sheikh Sultan bin Mohammed Al-Qasimi, brought about the establishment of the Bank of Sharjah on 21 December 1973. H.H. Sheikh Sultan bin Mohammed Al-Qasimi had particularly wanted the bank the first to be governed by the Emirate to be set up. Shares were held by the Emir of Sharjah, H.H. Sheikh Sultan bin Mohammed Al-Qasimi (20 percent), Paribas (20 percent), and the Kuwaiti Alhasawi Group (30 percent). The remaining capital was held by Sharjah residents after the first-ever public share offering in the Gulf. At the request of the H.H. Sheikh Sultan bin Mohammed Al-Qasimi, Paribas agreed to manage the bank and assigned Rachid Naceur to the task.

19. The Kuwait Investment Company was then owned 60 percent by the State of Kuwait and 40 percent by Kuwait Airlines.

20. OPEC: Organisation of Petroleum Exporting Countries

46 T H E H I S T O R Y O F B N P PA R I B A S I N T H E G U L F S TAT E S