How much money does he have, what does he have and what is the main tool behind Mohammed bin Salman’s global expansion plan?
For some time now, Saudi Arabian money has been making massive inroads into the Western sports market, from golf to martial arts and, above all, football, where just last summer they brought about changes that were unthinkable until recently, and the local championship some attracted the most famous footballers and coaches in the world. Such a dramatic intervention that trumped the competition was possible thanks to the Saudi sovereign wealth fund, which was set up specifically to invest public savings.
This fund is called the Public Investment Fund (PIF), is worth over $700 billion and is the main tool available to Prince Mohammed bin Salman to implement his economic growth and development plan that will gradually emancipate Saudi Arabia from its state would reduce dependence on oil and guarantee it an increasingly important role in technology, healthcare, tourism and even sports. It seeks to achieve this by investing in many different sectors and around the world. These investments have given rise to enormous ethical and political discussions and problems, since they are operations thanks to which a repressive monarchy like the Saudi one is gradually gaining control of various sectors, including strategic, democratic countries.
The Public Investment Fund was created in 1971 to invest the large surplus of public money accumulated by the oil industry. This is a sovereign wealth fund, i.e. a state investment fund that invests public money in financial instruments such as stocks or bonds or in real estate. The richest countries, for example those that export mineral resources and oil, typically have sovereign wealth funds: They put all tax surpluses, i.e. the tax surpluses, which are usually very high in these countries, into the fund and use them to invest in various types.
The Saudi fund has very ambitious expansion plans. It aims to accumulate over $1 trillion in investments by 2025 and at least double this by 2030, becoming the largest sovereign wealth fund in the world, surpassing Norway’s, which manages investments of over $1,400 billion. The Saudi one is currently sixth.
The public investment fund is headed by Yasir al-Rumayyan, a former banker and current chairman of Saudi Aramco, the country’s largest oil company. But Saudi Arabia’s Crown Prince Mohammed bin Salman plays a very important role behind the fund’s strategy, who is also president of the board of directors, which consists entirely of Saudi government ministers. The fund’s role is actually central to Saudi Arabia’s long-term economic growth plan desired by bin Salman. It is called “Vision 2030” and envisages a comprehensive reform plan that is intended to lead to a diversification of the economy by 2030, so that the country’s development and growth no longer depends solely on revenue from the oil industry.
A large part of the Saudi economy is now actually based on oil: Saudi Arabia owns 17 percent of the world’s known reserves and is the world’s second largest exporter. For this reason, it plays a large and controversial role in global oil and energy policy.
For example, it is the most powerful country with the greatest influence within OPEC+, the organization of the main oil producing countries, which also includes other authoritarian countries such as Russia, Venezuela and Libya: it is a so-called “cartel” with which the countries agree to produce quantities with the aim of keeping prices and thus their profits high. The decisions of OPEC+, over which Saudi Arabia has a significant influence, have an impact on global energy policy: through the power to maneuver the price of oil at the global level, they can also hinder and maneuver the process of energy transition. And the interest in keeping the fossil fuel market dynamic and strong is particularly relevant for Saudi Arabia, where almost half of the gross domestic product depends precisely on oil: for this reason, the country has great interest in ensuring that the energy transition in the The world is making slow progress, although investments are also being made in renewable energy sources.
But maintaining the energy status quo is not the only way the country wants to ensure growth and economic development. Bin Salman’s goal is also to diversify the economy to guarantee the country other sources of income: it is a strategy that almost all energy exporting countries are trying to pursue, aware that fossil fuels are in limited quantities and energy markets are still very strong bad are fleeting.
The sovereign wealth fund’s investments serve to strengthen new sectors. The fund has invested heavily in local companies such as banks, construction companies, energy companies (including Saudi Aramco), telecommunications companies, ports, tourism infrastructure, etc. One sector it is heavily focused on is air transport: the fund recently launched the airline Riyadh Air to boost tourist flows to the country. The Saudi government’s goals also include increasing the tourism sector’s contribution to GDP creation until it reaches 10 percent by 2030: this is not only an ambitious goal, but perhaps also unrealistic, considering that it is a predominantly desert land and that the proportion is on average much lower in countries with a strong tourism orientation (in Italy, for example, tourism accounts for 6 percent of GDP).
Since 2017, the fund has also been investing in and has begun construction of a futuristic city on the border between Saudi Arabia, Egypt and Jordan. Not much is known about the project yet: the city will be called Neom (a mixture of the prefix neo, meaning “new” in ancient Greek, and the Arabic word mustaqbal, meaning “future”) and will be about 26,500 square kilometers in size . However, despite the Saudi government’s optimism, Neom’s construction has faced huge delays, and many experts are skeptical that it can actually be built (here’s a video of the construction site).
There is also great concern at the international level about respect for human rights in the implementation of this project: the United Nations has reported that some people were killed and others sentenced to death for protesting against the destruction of entire villages in favor of construction sites.
– Also read: Death sentences have doubled in Saudi Arabia
Saudi Arabia is on Amnesty International’s so-called blacklist for human rights violations and is one of the most authoritarian countries in the world, with a clear tendency to suppress all forms of dissent and emancipation.
Although Mohammed bin Salman has long sought to project a more modern and presentable image of his country, in reality he systematically persecutes and represses anyone who might threaten his power. For example, he is accused of being the instigator of many crimes, including the murder of Jamal Khashoggi, a dissident and Washington Post employee who was killed in the Saudi consulate in Istanbul in October 2018. Various NGOs such as Human Rights Watch and Amnesty International have repeatedly condemned this and called for the abolition of the death penalty in Saudi Arabia. And over time, there have also been several condemnations from countries such as France and the United States for the lack of respect for human rights in Saudi Arabia.
For all these reasons, the Public Investment Fund’s investments abroad are rather worrying at the international level: the risk is that an authoritarian country, where human rights are not guaranteed, can gradually gain more and more influence in strategic sectors.
Major investments in recent years have actually included those in the telecommunications sector, perhaps one of the most strategically important on a global scale. The fund is negotiating a stake of almost 10 percent in Telefónica, the largest telecommunications company in Spain and one of the largest in Europe. And this is done through its subsidiary STC, a large industrial company based in Saudi Arabia. The fund then also took part in the Vantage Towers deal, one of Europe’s largest network infrastructures, which was once owned by Vodafone and has now been sold to a group of international funds, including the US fund KKR and the Saudi fund.
In the energy sector, the fund also seeks to diversify investments abroad in relation to fossil fuels, which is a clear attempt at greenwashing, that is, “facade” environmentalism through which companies and institutions carry out sustainable activities while maintaining these pollutants. The fund owns companies operating in the field of renewable energy, including ACWA Power, a company involved in water desalination plants and the research and development of technologies related to the so-called “green hydrogen”, that is, hydrogen from renewable sources. The company has recently concluded some partnership agreements with Italian companies, including Eni and A2A, in which Confindustria also has a stake. It then owns 60 percent of U.S. automaker Lucid, a California-based electric vehicle maker that is building its first overseas factory in Saudi Arabia.
The fund holds shares in various technology companies such as Meta, Microsoft and PayPal. The company also holds shares in Uber and Starbucks as well as some major investment banks such as JP Morgan and BlackRock. He then invested in two sectors with high media impact, video games and sports: as for the first, in February he became Nintendo’s largest foreign shareholder, after also owning important shares in the companies Activision Blizzard and Electronic Arts.
And then there is sports and especially football. More recently, Saudi teams, some of which are government-run, have been signing some of the world’s most famous footballers thanks to their gigantic financial resources. The main local football championship is the Saudi Pro League: at the moment it is certainly not comparable to the European Championships or even to other more competitive tournaments outside Europe, but Saudi Arabia’s goal is to significantly improve it in the shortest possible time until it reaches international level a valid and competitive alternative. Even without any guarantees about the quality of the championship, thanks to huge salaries, the Saudi teams have already managed to convince many champions of European teams to move.
There are four Arab teams directly controlled by the fund and, not surprisingly, they are the most active in the transfer market: Al-Ittihad, which won the last championship, Al-Nassr, for which Cristiano has been playing since last year, Ronaldo, Al-Ahli and Al-Hilal. The Public Investment Fund holds 75 percent of the shares in all four companies. Al-Nassr has guaranteed Cristiano Ronaldo a contract that will allow him to earn over 200 million euros in two and a half years until June 2025. Karim Benzema, Ronaldo’s former teammate at Real Madrid, has moved to Al-Ittihad and has signed a contract worth around 200 million euros, which will be paid to him in two years. The same club has also signed French national team midfielder N’Golo Kanté, who will earn a total of 100 million euros over four seasons. Brazilian champion Neymar went to Al-Hilal instead, where he was expected to earn around 300 million euros in two years.
Saudi Arabia also recently hired Italian Roberto Mancini as coach of the men’s national team, who suddenly left the Italian national team.
In addition to football, Saudis have also invested heavily in other sports and entertainment sectors in recent years, such as Formula 1, golf, handball, rallying and martial arts. At the beginning of August, the fund founded a subsidiary specifically for investing in sports: SRJ Sports Investments.
It is not clear what financial return such investments can guarantee: for example, the amounts paid to football players and coaches are well above the market average, and it is difficult to imagine that they can actually be profitable in a football championship as modest as the Saudi one. It is more likely that football and other sports, due to their great popularity, are seen as particularly effective tools for improving the country’s reputation in the world through the practice of so-called sportwashing, such as that attempted in Qatar during the World Cup.
– Also read: What Saudi Arabia wants to achieve with football
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