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 Huettenwerke 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 Huettenwerke'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.

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