Stock ADQ1
ADQ’s investments are mostly in sectors of national interest to the UAE such as energy, logistics, healthcare and food security. Image Credit: Supplied

Dubai: A shift in strategy by Abu Dhabi to invest across the region using sovereign wealth fund ADQ reflects an effort by the Gulf oil producer to use economic diplomacy to build regional alliances, from Turkey to Israel and Egypt, three sources said.

The change suggests greater use of soft power.

ADQ, one of Abu Dhabi’s three main sovereign wealth funds, began in 2018 as a vehicle for holding state assets.

But it has since expanded overseas. ADQ, estimated by Global SWF to manage $108 billion in assets, lined up 25 investments worth about $6.6 billion from January 1 to October 1 this year, making it among the most active dealmakers in the Middle East.

“The region is a priority. They want to have strong political ties with these countries,” one of the three sources told Reuters, speaking on condition of anonymity.

Huge financial power

Now, the UAE is focused on building economic bridges, Emirati officials have said when outlining foreign policy.

Among recent deals, ADQ launched a $300 million technology fund in March with Turkey’s sovereign wealth fund to invest in venture capital funds and opportunities inside Turkey.

It has invested in UAE ally Egypt, and has also signed deals with Israel.

“The UAE now is using its huge financial, economic power to reach the same goal” that it had pursued using “hard power”, said Abdulkhaleq Abdulla, an Emirati political analyst. Abdulla defined this goal as the UAE’s “vision for a stable and moderate Middle East and for promoting the UAE’s national interest.”

ADQ’s strategy has similarities to one by Mubadala, which invests around the world, including locally and regionally, although its portfolio is skewed towards the US and Europe while ADQ focuses mainly on national champions and the region.

Good opportunities

Sheikh Tahnoon bin Zayed Al Nahyan, who is UAE national security adviser, visited Turkey and Iran as the UAE moved to engage with them; after meeting him in August 2021, Turkish President Tayyip Erdogan said that if talks continued “in a good way”, the UAE would soon make “serious investments”.

Likened to Singapore’s sovereign wealth fund Temasek, ADQ started out as a holding company for government assets including Abu Dhabi’s ports, stock exchange and a nuclear power company.