The goal of Saudi investments in billions abroad: profit or political influence?

Saudi Arabia has invested a lot of money in many countries of the world, especially after huge profits due to the rise in oil prices. This has raised questions and fears that it is aimed at achieving political goals. What is the truth? Catherine Sher survey.

Calls to boycott Saudi Arabia appear from time to time However, because of its record of human rights abuses, any country that tried to boycott the world’s second-largest oil exporter would face difficult economic consequences, especially since it required divesting itself of generous Saudi investments.

Over the past six years, investments have increased External Saudi Arabia, as the Saudi Public Investment Fund – a sovereign fund owned by the state – owns shares in international companies, notably Amazon, Google, Visa, Microsoft, Disney, Nintendo, Uber, PayPal and Zoom.

The matter does not depend on these companies, but Saudi investments include the field of global sports, since last year 2021 the Public Investment Fund announced the completion of the acquisition of Newcastle Football Club, as well as the Fund’s support for the “Live Golf” tournament.

The Saudi sovereign fund has also pumped billions of dollars into the shares of other American companies, such as “BlackRock”, which is the world’s largest asset management company.

The sovereign fund’s name has emerged as a first candidate to buy a minority stake in the “Starbucks” franchise in the Middle East from the Kuwaiti “Alshaya” group, according to Bloomberg.

This means that the money spent on all these commodities will benefit Saudi investments.

drastic changes

The similarity between these deals is that the Saudi Public Investment Fund, established in 1971 as a Saudi state-owned sovereign fund, is behind them.

It is worth noting that many countries of the world own sovereign wealth funds, which means that Saudi Arabia is no exception.

Until a relatively short time, the fund pumped mostly low-level domestic investments, as it was not a major international player. However, this matter changed, starting in 2015, the year that coincided with the appointment of Prince Mohammed bin Salman as deputy crown prince, who became crown prince two years later. , and most recently prime minister, and is currently the de facto ruler of Saudi Arabia.

Bin Salman consolidated the empire’s wealth under his orders, including making the Public Investment Fund a center for implementing his plans to modernize the country and diversify its economy away from oil.

The start was in 2016, when the fund first made headlines worldwide with its $3.5 billion investment in Uber.

Karen Young, a senior fellow at the Columbia Center for Global Energy Policy, described in 2019 the new role of the Public Investment Fund in the Saudi economy as “unprecedented”. She added: “The fund has become the central growth engine in Saudi Arabia in its new form, according to the vision of Mohammed bin Salman, as state resources are deployed to strengthen the fund’s strength, including the sale of state assets.”

Young said that the fund, in addition to giving bin Salman a way to change things quickly and make money quickly, strengthens his position against internal opposition or even against alternative ideas about the appropriate role to be entrusted to private institutions. “

big ambitions

According to what was published, the goal behind the fund is to eventually become the “largest and most influential” sovereign wealth fund in the world by 2030 with assets of $2 trillion.

It is worth noting that the fund currently has assets of $620 billion, which is four times the value of assets in 2015.

It is worth noting that the Norwegian sovereign fund It is currently the largest in the world with assets of $1.4 trillion, while the Saudi Public Investment Fund ranks sixth.

However, there are expectations that the fund’s rating will improve in the future thanks to the global energy crisis caused by the Russian invasion of Ukraine and the subsequent rise in oil prices. Against this backdrop, Saudi Arabia expected to post a budget surplus for the first time in 10 years, meaning more money is being pumped into the Public Investment Fund.

But the rise in the power of the Public Investment Fund, and thus the influence of Mohammed bin Salman, who is behind the fund, has raised fears among some observers that Saudi Arabia could use the fund to garner international support for its goals. and political agenda.

Polish the image of Saudi Arabia

In this context, Amnesty International expressed its concern late last year 2021 about the Saudi sovereign fund’s acquisition of Newcastle United as “the laundry of human rights violations in sport.”

Human rights organizations have described Saudi Arabia’s hosting of the Formula 1 Grand Prix as an attempt to exploit sport to burnish the Kingdom’s image.

Similar questions have been raised about the fund’s existence as an indirect investor in Twitter and whether it had an impact on the way the company handled a Saudi spy scandal in 2015. It is worth noting that a US court convicted a former director of Twitter accused of spying for Saudi Arabia, with six criminal charges, of including acting as a client of the kingdom and trying to hide payments he received of an official connected to the royal family.

Twitter, for its part, has denied any influence from investors on its activities.

The ambitions of the Saudi sovereign fund did not stop at this level, as Saudi Arabia pumped investments through the fund and others, such as the Saudi-Japanese Investment Fund, run by a subsidiary of the Japanese “SoftBank” group become This paved the way for Saudi Arabia to enter the technology market in the United States.

As a result, American journalist and technology specialist Kara Swisher went on to say that “if Saudi Arabia is removed from the global network, everything will collapse.”

The researchers say it is difficult to determine which sectors the fund is pumping into because its business is not transparent.

It is worth noting that the “German Institute for International and Security Affairs” It was mentioned in a research article two years ago that there were no indications that the Saudi sovereign fund had pumped large direct investments into Europe and Germany in particular.

However, that approach could change, according to Young, who is currently writing a book on Gulf sovereign funds.

In an interview with Deutsche Welle, she added that these funds are currently looking to invest in Greece “in terms of defense and in Germany for energy deals.”

The research paper said that in the case of expanding the fund’s activity in Europe, “in this case, the political impact must be evaluated given the close relationship between the fund and the Saudi government. A judgment must be made about does the fund function only as a profitable investor or does it follow a foreign policy agenda?”. “

to make profit

Young said that so far the Saudi sovereign fund is still pumping investments to make a profit, adding: “The fund is still a local tool to promote local investment with the aim of transforming the Saudi economy. And it can be possible.”

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