Abu Dhabi: Rising Power

To track Barack Obama's path through the Middle East in recent days was to stick a pin in the region's bloodiest spots: Iraq, Israel and the Palestinian territories. But another Middle East was also on show this past week, and it is a place — a new world, actually — that is overflowing with wealth, confidence and ambition.

On July 22, General Electric announced a string of deals with the Mubadala Development Company, a government-controlled investment fund in the tiny Persian Gulf emirate of Abu Dhabi. Among other things, GE and Mubadala pledged to invest $8 billion in a joint venture to sell financial products in the Middle East and Africa. Ultimately, said Mubadala, it plans to be one of GE's 10 largest investors.

Flush with profits from huge oil and gas reserves, sovereign wealth funds like Mubadala have been on quite a spree of late, particularly in the U.S. Eager to reduce Abu Dhabi's economic dependence on energy, Mubadala has bought stakes in chipmaker Advanced Micro Devices and private equity giant the Carlyle Group; another sovereign wealth fund, the Abu Dhabi Investment Authority, paid $7.5 billion to become Citigroup's largest shareholder; and this month the Abu Dhabi Investment Council offered $800 million for a 90% stake in Manhattan's iconic Chrysler Building, pictured above.

Abu Dhabi's funds, and those in such places as Kuwait, Saudi Arabia and Qatar, are part of an epochal shift in the economic balance of power toward the energy-rich Gulf. It helps that the downturn in the U.S. economy and the anemic dollar are offering up relative bargains. Shares in GE — the great symbol of American management prowess — have fallen by more than a quarter in the last year.

Not so long ago, attempted acquisitions by interlopers from Dubai and China sparked a public outcry. But as long as the U.S. economy falters, nobody will grumble too loudly at this urgent injection of foreign cash. As they say on Wall Street, liquidity is like oxygen — you only notice how much you need it once it's gone. And if there's one thing these ascendant energy powers have, it's liquidity. Hundreds of billions of dollars of it.