Saudi Crown Prince Mohammed bin Salman’s Ruthless Quest to buy up the World
The mastermind behind the Saudi Kingdom’s new investment philosophy is 37-year-old Crown Prince Mohammed bin Salman. The sixth of 25 sons to the Saudi king, Salman bin Abdulaziz Al Saud, MbS (as he is known) has positioned himself to become the heir to the throne of a royal family, which has a combined wealth of £1.3 trillion. The crown prince’s personal wealth is believed to total around £2.4bn, which he has spent on such baubles as a £240m French chateau, a £400m yacht and even £360m on a painting by Leonardo da Vinci.
According to Ben Wright, of The Telegraph, his real power comes in being able to wield the financial might of the country’s wealth fund and Saudi Aramco, the state-owned oil company. The audacious takeover of golf and the growing stable of top footballers in the desert kingdom raises yet another question: is there anything – or anyone – that MbS can’t buy? Or is he set to become, as some have stated to dub him, “the man who bought the world”?
Few of those who have met the crown prince believe he lacks confidence. “He is undeniably charismatic, he’s curious and interested in stuff,” says Justin Scheck, the journalist and co-author of Blood and Oil: Mohammed bin Salman’s Ruthless Quest for Global Power. “He’s in this weird position where he’s in charge of everything in his country. But he also exudes the belief that he’s qualified to do it all.”
The shock merger of the PGA Tour, the DP World Tour (which was previously called the European Tour) and LIV Golf, is to date, the most audacious manifestation of Saudi petrodollars being deployed to diversify the economy away from oil and boost the country’s profile on the global stage under a strategic framework labelled Saudi Vision 2030. Sport is a key plank of the efforts to alter Saudi’s conservative image and open it up to increasing tourism.
Saudi Arabia, which has long displayed a penchant for snapping up shiny assets around the world, has effectively bought almsot an entire sport, it appears that the LPGA and LET – the main women’s tours – are conspicuously absent from the deal.
The new umbrella entity housing PGA Tour, the DP World Tour and LIV Golf will be, according to the statement that accompanied the news, “principally funded by the Saudi government”. Even more tellingly, its chairman will be Yasir bin Othman Al-Rumayyan, the Saudi businessman who is governor of the Public Investment Fund (PIF), the Gulf country’s $700bn sovereign wealth fund.
According to its website, the PIF’s vision is “to be a global investment powerhouse and the world’s most impactful investor, enabling the creation of new sectors and opportunities that will shape the future global economy, while driving the economic transformation of Saudi Arabia”. Coming from most other organisations, this might sound like hubris. But the PIF has steadily built massive stakes in a wide range of international businesses, including Bank of America, Boeing, Citigroup, Disney, Facebook and Nintendo.
Sport is, however, where it is making the biggest waves. In 2021, the PIF led the consortium that bought Premier League football club Newcastle United for more than £300m. Last year, reports suggested that the fund had considered a $20bn bid for Formula 1 motor racing. The kingdom is also thought to be weighing a bid to host the 2030 FIFA World Cup, following the recent success of the tournament hosted in Qatar.
Just this week the sovereign wealth fund took control of several local football clubs. While the teams themselves are not household names, the Saudi league is beginning to attract some of the biggest players in football. It is already home to Cristiano Ronaldo, who joined the Saudi club Al Nassr on a contract reportedly worth $200m a year. France’s Karim Benzema is set to join a local rival after leaving Real Madrid at the end of this season.
With the values of many global assets still depressed following the turmoil of the pandemic, and many countries currently in (or flirting with) recession, Gulf states are awash with petrodollars thanks to a spike in energy prices caused by Vladimir Putin’s invasion of Ukraine. Many money-starved corporations and sports bodies have started to see the region as one of the few remaining sources of ready cash in the world.
Middle Eastern gas and oil producers are expected to generate something like $1.3 trillion in additional revenue over the next four years, above and beyond what was being forecast before the war because of higher energy prices, according to the International Monetary Fund.
The PIF ballooned from just $150bn eight years ago to somewhere in the region of $700bn today and its foreign exposure has increased from less than 10 per cent to 25 per cent over roughly the same time period. That is by no means the limit of its ambition: the fund is expected to have a cool $1 trillion in assets under management by 2025, with nearly a third invested abroad.
The situation is redolent of 2008 when many global companies were laid low by the financial crisis and forced to go cap in hand to the Gulf. The difference this time is that the region’s increasingly confident monarchies don’t need asking and, armed with some of the biggest cheque books in the world, are on the hunt for the kind of assets that will bolster their standing on the global stage through so-called “soft power”.
In the past the boon from Saudi’s hydrocarbons was used to shower the population with subsidies, benefits, public-sector pay increases and infrastructure projects. This amounted to a form of social bribery and led to huge cycles of boom and bust tied to the global oil price. With the growing possibility that fossil fuels will eventually be phased out, and spurred on by the Arab Spring uprisings in many neighbouring countries, MbS embarked on a bold programme of social and economic reform.
PIF is spending vast sums, both at home and abroad. Even those petrodollars that are deployed overseas are in large part designed to lure knowhow, technology and, ultimately, further investment to the kingdom. There is a new mood of self-confidence and assertiveness in the country, say Gulf experts; the prevailing belief is that the country should be more open and ambitious. MbS clearly doesn’t want to play second fiddle to any other global powers.
Not all of these investments have paid off, though. “One of the most important things in a monarchy is loyalty,” says Scheck. “Yasir bin Othman Al-Rumayyan has been really loyal to MbS and that has allowed him to weather a lot of mistakes.” It’s likely, for example, that the PIF has taken quite a hit on its investment in the SoftBank’s Vision fund. The fund lost ¥4.3 trillion ($32bn) in the year that ended in March, which was nearly twice what it lost over the course of the previous 12 months.
Steffen Hertog, an expert on the Gulf at the London School of Economics, believes PIF’s activities should be the cause of some concern. “We get almost no disclosure on the spending they undertake,” he recently told the Financial Times.
There are, for example, questions about whether the fund is in danger of over-extending itself. One of MbS’s most ambitious projects is Neom, a futuristic city that is being built from scratch on the Red Sea coast and is expected to cost a $500bn. But some have suggested that the final bill for the city, which will be solely powered by renewable energy sources, could easily spiral out of control.The country recently established a “spending efficiency centre” in the hope of ensuring it gets more bang for its considerable stash of bucks. However, at this stage, it is unlikely that return on investment is Saudi Arabia’s top priority.
“If you are buying celebrities – which is what [the LIV-PGA merger] amounts to – it keeps Saudi Arabia at the centre of global popular culture,” says Scheck. “They are just spending a lot of money to get attention. That’s a lot easier than spending money to make money. That’s not a problem at the moment because they have so much. But it sort of limits the extent of the influence that they are buying.” Argentina’s Lionel Messi, for example, has just turned down an offer reported to be worth $400m a year.
Nevertheless, this amounts to a big shift. Previously the kingdom preferred to fly under the international radar. “It was very conservative, with a powerful religious establishment and a royal family that was happy to spend a lot of money on itself,” says Scheck. “It didn’t want to attract attention. Now it does.”
Does the amount of money that Saudi Arabia can rustle up at a moment’s notice shield the regime from criticism? In recent years it has been condemned for the war in Yemen and the murder of the journalist Jamal Khashoggi. “I think that’s always been a factor,” says Scheck.
However, those seeking to understand why Saudi has gone all in on golf should perhaps not overcomplicate their analysis, according to Scheck.
“You have to remember that this is an absolute monarchy,” he says. “That means actions are often less motivated by a deliberative process or strategy than they are by individual desires. And I think in this case you can’t overstate the importance of the fact that Yasir bin Othman Al-Rumayyan just really, really likes golf. It’s his favourite thing.”
Credit: The Telegraph and edited for Newsband