In February 1953, eight years before independence, Kuwait set up an investment board in London to place its surplus oil revenue abroad. It was the world’s first sovereign wealth fund. Few people outside the Gulf noticed. Thirty-seven years later, the idea behind it was tested in the hardest way possible.
When Iraq invaded in August 1990, Kuwait lost its territory in a day. It did not lose its wealth. Within hours, Washington and London froze Kuwaiti state assets, not to punish Kuwait but to keep them out of the invader’s reach. The investments built up over four decades sustained the government in exile and helped pay for liberation and reconstruction. A state had lost its land and kept its means because the law of state property protected its sovereignty when its borders could not.
That lesson matters again. Saudi Arabia is under fire and the Gulf’s sovereign funds are among the largest pools of capital in the world. Saudi Arabia’s Public Investment Fund manages about $900 billion. The Kuwait Investment Authority is estimated to manage about $1 trillion. The question is what protects that wealth in a war.
In 1990, freezing orders protected a state’s assets. In 2022, Western governments froze about $300 billion of Russia’s central bank reserves after the invasion of Ukraine. The legal tool was the same.…
