VZCZCXYZ0012
RR RUEHWEB

DE RUEHLO #0774 0741541
ZNR UUUUU ZZH
R 141541Z MAR 08
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC 7811
INFO RUEHBS/USEU BRUSSELS
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS LONDON 000774 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN UK
SUBJECT: SOVEREIGN WEALTH FUNDS CREATE JOBS SAYS DEPUTY SECRETARY 
KIMMITT 
 
Summary 
------- 
 
¶1. (SBU) Sovereign Wealth Funds (SWFs) and State-owned Enterprises 
(SOEs) behave differently, said Treasury Deputy Secretary Robert 
Kimmitt in a March 10 meeting with Michael Snyder, Chairman, City of 
London Policy and Resources Committee. Kimmitt said SWFs have been 
non-political in their instruments while SOEs like Gazprom result 
from a political decision to retain government ownership.  Foreign 
direct investment in the U.S. has created ten million jobs.  Kimmitt 
stressed the need to tell the job creation story of foreign direct 
investment including SWFs, to avoid unnecessary regulation.  Kimmitt 
also urged continued UK support for the Transatlantic Economic 
Council (TEC). END SUMMARY 
 
Sovereign Wealth Funds 
---------------------- 
 
¶2. (U) Sovereign Wealth Funds (SWFs) are run by finance experts; 
they are generally not political, Kimmitt said. However, they now 
face political pressures and criticisms. Current multilateral 
efforts involving the IMF, OECD, and the G-7 will bring a necessary 
political perspective to the dialog on SWFs. 
 
SWFs Differ From State Owned Enterprises 
--------------------------------------- 
 
¶3. (SBU) Kimmitt said that there has not been an example of an SWF 
investing in the U.S. for other than commercial reasons.  He said 
also that it is important to make a distinction between SWFs 
(traditionally non political) and state-owned enterprises (SOEs) 
whose behavior could raise issues. Kimmitt said that SWFs have 
indicated they want to avoid political problems in the U.S. and have 
asked for guidance on how to structure deals to avoid problem. 
 
¶4. (SBU) Snyder agreed with the distinction between SWFs and SOEs 
and mentioned Gazprom as an example of a SOE that had clearly been 
used for political ends.  He added that Europeans do not 
differentiate well between SWFs and SOEs so that the European view 
of SWFs is tainted by the activities of SOEs like Gazprom. 
 
¶5. (U) In addition to highlighting the behavioral differences 
between SWFs and SOEs, Kimmitt said that it is important to stress 
the job creation record of foreign direct investment (FDI) including 
the FDI of SWFs.  Kimmitt said that FDI in the U.S. has resulted in 
the direct creation of five million new jobs and the indirect 
creation of another five million. A greater proportion of jobs 
resulting from FDI are also in the manufacturing sector. 
 
¶6. (U) Snyder said that The City of London is sponsoring a London 
conference on March 31 jointly with the Organization for Economic 
Co-operation and Development (OECD) and the International Monetary 
Fund (IMF).  He said that it would be an international conference, 
addressing the interests of both investor and recipient countries. 
Kimmitt said the OECD was developing best practices for recipient 
countries and the IMF was developing best practices for investor 
countries.  He said interim reports are expected at the February 5 
G-7 meeting in Japan. 
 
Transatlantic Economic Council 
------------------------------ 
 
¶7. (U) In closing, Kimmitt highlighted the Transatlantic Economic 
Council (TEC), saying that it had great potential to promote 
substantive dialog on key issues like accounting.  He stressed to 
Snyder that TEC needs continuing UK involvement. 
 
¶8. (U) USG: Richard LeBaron, DCM; Robert Kimmitt, Deputy Secretary, 
Treasury; Eric Meyer, Director, Europe and Eurasia, Treasury; Rob 
Saliterman, Spokesman, International Affairs, Treasury; Warren 
Chane, Notetaker.  UK: Michael Snyder, Chairman, City of London 
Policy and Resources Committee; Paul Sizeland, Assistant Director, 
Economic Development Office. 
 
¶9. (U) Deputy Secretary Kimmitt has cleared this message. 
 
TUTTLE