The largest state of the United Arab Emirates, Abu Dhabi, now ranks as the largest shareholder for Citigroup Inc.

Citigroup, America’s largest bank by assets, has lost 42.5 percent of its market value in the last five months due primarily to the subprime mortgage and credit crisis. Citigroup may lose $17.8 billion in credit-market losses by the end of the second half of the fiscal year.

The Abu Dhabi Investment Authority (adia) has used Citigroup’s crisis as an opportunity to buy shares that political barriers may have blocked them from buying in better times. As Giyas Gokkent, head of research for the National Bank of Abu Dhabi pjsc, commented, “Clearly, Citi has a problem with capital adequacy after the subprime crisis. adia has seen an opportunity to get cheaply into a blue-chip stock.”

“The idea is to capture growth for their investment portfolio,” Gokkent stated.

The adia is infusing $7.5 billion into Citigroup to buy 4.9 percent of its stock.

New York-based Citigroup’s crisis has allowed the adia, the world’s wealthiest sovereign fund, to buy up American stocks while being seen as a savior instead of an Arab predator. U.S. Senator Charles Schumer praised the adia for helping New York retain its status as the world’s financial capital.

Yet Abu Dhabi may have created a model for how other emerging-market investors can take advantage of the U.S. mortgage crisis. In regard to future Gulf Arab investments in Wall Street, Gokkent said that “There will be more such investments. The other buyers will likely play the same white-knight role.”

Reuters reports that “Investors from Dubai to China could be considering similar deals with cash-strapped U.S. banks, hoping to ride a recovery in their stocks and avoid the political barriers that could have been thrust in their path in better times.”

Another of Citigroup’s main shareholders is Saudi billionaire Prince Alwaleed Bin Tala. Gulf investors have spent over $70 billion this year on overseas acquisitions.

State-controlled Saudi Basic Industries Corp. agreed this May to buy the plastic unit of America’s General Electric Inc. (a major supplier to the U.S. military), while China’s government-controlled Citic Securities Co. bought a 6 percent stake in America’s fifth-biggest securities firm—Bear Stearns Cos.

More and more American companies are being bought up by foreign investors. In the short run, this trend may temporarily prop up America’s ailing economy, but in the long run, this only gives other nations control over U.S. strategic industry. In the advent of a war or economic recession, the loss of control over such national assets would be disastrous.

For more information on the consequences of foreign investment in America, read “The Feared Foreign Corporate Invasion Has Begun.”