IRAN: Buying into Krupp

The fabled Essen-based Krupp industrial empire, which supplied munitions for Germany’s military forays for more than a century, was owned entirely by the Krupp family in 1967 when near bankruptcy forced the Krupps to relinquish control. But ownership still remained exclusively German, with 95% of Fried. Krupp Hüttenwerke AG, the steel-producing operating company, in the hands of a foundation. Last week, the Iranian government and the management of Krupp announced that Iran would acquire a fourth of Hüttenwerke’s shares—at an estimated cost of $100 million.

The purchase, which is scheduled to become effective by October, will be the first major long-term investment of swelling Middle Eastern oil dollars in Western Europe, and was welcomed with relief by bankers and governments alike. Europe’s banks still face a liquidity squeeze that was triggered in part by the requirement to “recycle” petrodollars, which up to now have gone largely into high-turnover short-term investments. Bonn government officials see such investments as giving the oil-producing countries a stake in the world’s major trading nations, thus perhaps assuring less reckless oil-price policies.

Ideal Marriage. The Krupp acquisition reflects Iran’s ambitious industrialization plans. Hardly a week goes by without new commitments to mutual ventures or economic assistance to less developed countries, and one estimate is that the program already has resulted in outlays of some $9 billion. Iran and Krupp plan to set up a joint investment bank in Switzerland to finance projects outside West Germany. The steel-company acquisition is viewed by both Iranians and Krupp executives as an ideal marriage: Iran needs Krupp’s technical know-how, and Krupp needs the infusion of capital from Iran. Last year, the company produced 3.1 million tons of iron and 4.3 million tons of steel, and generated $1 billion of Krupp’s worldwide sales of $3 billion.

U.S. Financiers have long felt that a great deal of the oil producers’ new wealth will ultimately find its way into the American securities markets, where it is badly needed—and, no one seemed disconcerted last week that Europe and not the U.S. had received the first major chunk. There are a lot of petrodollars to go around. Kuwait recently has begun pumping money into shares of unidentified U.S. and European companies, and Abu Dhabi plans to buy a major interest in a big office building in London. Sultan Qabus bin Said of Oman even got into the act last week: he reportedly paid $4 million for a German hotel and 4,000 surrounding acres. He wants to turn it into a summer residence for his mother.