There are regular calls to boycott Saudi Arabia because of its well-documented history of human rights violations. But even if you try to do that, you’re going to have a hard time if you’re trying to avoid international investment in the country.
Over the past six years, these have increased significantly. Saudi Arabia’s Sovereign Wealth Fund, a state-owned investment fund, currently holds stakes in many companies, including Amazon, Google, Visa, Microsoft, Disney, Nintendo, Uber, PayPal, and Zoom.
It also owns the holiday company Carnival, the English Premier League football team, the controversial professional golf tournament Newcastle United, and has significant relationships with BlackRock, the world’s largest asset manager. increase. In fact, every time I buy a caramel mocha his latte at Starbucks or play his game World of Warcraft online, I’m also backing the Saudi investment.
Saudi Arabia has acquired an 80% stake in the English football club in late 2021.
The reason Saudi Arabia has stakes in all these big names is its Public Investment Fund, or PIF for short.
Most countries have sovereign wealth funds and Saudi Arabia is no exception. The PIF was first established in 1971, but until relatively recently, Saudi Arabian funds made mostly modest domestic investments and were not big international players.
All that changed around 2015 when Saudi Arabia’s de facto ruler, Crown Prince Mohammed bin Salman (often simply called MBS) began consolidating the kingdom’s wealth under his own name. I was. MBS has put his PIF at the center of his plans to modernize the country and diversify the economy away from oil.
In 2016, the fund made global headlines for the first time with its $3.5 billion (€3.1 billion) investment in ride-hailing company Uber.
In 2019, Karen Young, a senior fellow at Columbia University’s Center for Global Energy Policy, noted in a report for the Washington-based Middle East Politics Project that the PIF’s new role in the Saudi economy was “unprecedented.” Did. As envisioned by MBS, it is a central engine of growth in the new Saudi Arabia. The country’s resources are directed to feed the PIF, and the country’s assets are being sold to raise cash for his PIF. “
In a 2019 report, Young said that in addition to giving MBS a way to change things quickly and make money, he also told the Saudi prince to be “very much against internal objections and alternatives to the proper role of private companies.” He claimed to provide a “strong hand to
The ultimate goal is for the PIF to become the world’s largest and “most influential” sovereign wealth fund with $2 trillion in assets by 2030, according to the fund’s press release. His current fortune is around $608 billion, more than four times what he had in 2015.
The Norwegian Sovereign Wealth Fund, with $1.4 trillion worth of assets under management, is currently the largest in the world, and the PIF is currently number six.
In 2018, PIF invested $45 billion (€47 billion) in SoftBank Vision Fund, the world’s largest tech fund.
However, PIF’s prospects for moving up these rankings look good. Oil prices have risen significantly thanks to the global energy crisis caused by Russia’s invasion of Ukraine. As a result, Saudi Arabia, the world’s second-largest oil producer, expects to have a budget surplus for the first time in a decade, and may be able to pump more money into the PIF.
But as the PIF and the authoritarian leaders behind it become more and more powerful, some observers are growing concerned. Is all international investment comparable to political power? Will Saudi Arabia use the PIF to buy support for its own foreign policy goals?
Late last year, Amnesty International expressed concern over Saudi Arabia’s takeover of Newcastle United, viewing it as a way of “sportwashing” human rights violations. Critics have said the same about the LIV Golf Tournament and his recent F1 motoring his race in Saudi Arabia.
Also, the PIF — a large but indirect investor in Twitter (who owns shares through another Saudi company) — has had some trouble with the social media company’s response to the 2015 Saudi espionage scandal. I was also asked if I had any influence. Twitter denies investors influence its day-to-day operations.
Saudi Arabia has injected billions of dollars into the US tech scene through the PIF and other funds investing in Japan’s SoftBank and others. And, as US journalist and field expert Kara Swisher has argued, “If you remove Saudi Arabia from the global global network, everything will fall apart.”
PIF recently opened its books to investors, but many of its purchases are not transparent, researchers say. The PIF does not appear to have made significant direct investments in Europe or Germany in 2019, reports a research paper from the German Institute for International Security Studies (SWP).
it may be changing. Columbia University’s Young, who is currently writing a book on sovereign wealth funds in the Gulf, told DW recently that Gulf sovereign wealth funds have invested in Greece “for defensive reasons,” and have invested in energy trading. He said he is considering investing in Germany for
The 2019 SWP report warned that “if the PIF expands its investment activities in Europe, a political impact assessment may be required given the fund’s close ties to the Saudi government.” is doing. “An assessment will need to be made as to whether the PIF will act as a solely profit-seeking investor or pursue a foreign policy agenda.”
German Chancellor visited Saudi Arabia this month to discuss energy with MBS
Today, PIF still operates primarily as a profit-seeking investor, Young said. “It is really a domestic tool for local investment and transformation of the Saudi economy.”
She agreed that the PIF could eventually become more political, but argued that “currently the priorities are domestic growth, job creation and stability in Saudi Arabia.”
Local investments, however, are a different story, says Young and other experts. Gulf states, including Saudi Arabia, have been competing for economic clout with countries like Egypt for years. The race has accelerated recently as cash-strapped countries like Egypt and Turkey struggle with severe economic problems and debt. Part of what Britain’s Financial Times has called a “shopping spree” is shopping for bargains for much wealthier neighbors in the Gulf States to invest in.
“Riyadh is pressing Egypt to sell its family silver,” said Stefan Rohl, head of SWP’s Middle East and Africa division, adding that stakes in profitable state-owned enterprises and the Egyptian government could prove profitable. “Over the past few weeks, the SEIC has [the newly established Saudi Egyptian Investment Co, owned by the PIF] acquired or invested in an Egyptian company; But this is not completely transparent. Egyptian civil society is watching this development with concern and is asking if their country is sold out,” Roll explained.
A stake in Saudi Arabian oil company Aramco worth $80 billion (€83 billion) was transferred to the PIF earlier this year
But he also believes that, at least for now, Saudis are “more interested in using their position to obtain favorable deals than with political influence.”
“These purchases are not surprising after a booming cycle in oil markets,” added Sarah Basubundy, associate at the Hamburg-based GIGA Middle East Institute. “And it’s important to note that one of the most common motivations for these funds is still maximizing [financial] Return value. “
On the one hand, “all investments are also the pursuit of some kind of profit on the part of the investor. “
Editing: Nicole Goebel