Is Crown Prince Mohammed bin Salman going to be the «man who bought the world»?
There are dozens of questions surrounding the shocking merger of the PGA Tour, DP World Tour (formerly known as the European Tour) and LIV Golf. But one thing is quickly becoming clear: Saudi Arabia, which has long shown a penchant for buying up shiny assets around the world, has in fact bought an entire sport. (Well, almost an entire sport; it seems that LPGA and LET — the main women's tours — are clearly out of the deal.)
According to a statement accompanying the news, the new umbrella organization, which will include the three organizations, will be «primarily funded by the Saudi Arabian government.» More tellingly, Yasser bin Osman Al Rumayyan, a Saudi businessman who runs the State Investment Fund (PIF), the Gulf state's $700 billion sovereign wealth fund, will become its chairman.
To date, this is the most daring manifestation of how Saudi petrodollars are being used to diversify the economy, move away from oil and raise the country's profile on the world stage as part of a strategic program called Saudi Vision 2030. Sport is a key element in efforts to change Saudi Arabia's conservative image and open it up to growing tourism.
According to its website, PIF's vision is «to be a global investment powerhouse and the world's most influential investor, enabling the creation of new sectors and opportunities that will shape the future global economy while driving Saudi Arabia's economic transformation.» To most other organizations, this may sound like arrogance. But PIF has steadily amassed huge stakes in a wide variety of international companies, including Bank of America, Boeing, Citigroup, Disney, Facebook, and Nintendo.
From gaming to golf: rising spending in Saudi Arabia
However, sport causes the most excitement. In 2021, PIF led a consortium that bought Premier League football club Newcastle United for over £300m. Last year, reports said the fund was considering a $20 billion proposal for Formula One racing. The kingdom is also believed to be considering hosting the 2030 FIFA World Cup following the recent success of the tournament hosted in Qatar.
The sovereign wealth fund took control of several local football clubs this week. . While the teams themselves aren't household names, the Saudi league is starting to attract some of the biggest players in football. It is already home to Cristiano Ronaldo, who joined Saudi club Al-Nasr on a deal reportedly worth $200 million a year. Frenchman Karim Benzema is set to join local rivals after leaving Real Madrid at the end of this season.
The inspiration behind the new investment philosophy is 37-year-old Crown Prince Mohammed bin Salman. The sixth of the 25 sons of Saudi King Salman bin Abdulaziz Al Saud, MbS (as he is known) was on his way to becoming the heir to the throne of the royal family, which has a combined wealth of £1.3 trillion. The crown prince's personal fortune is estimated at around £2.4 billion, which he has spent on trinkets like a £240 million French castle, a £400 million yacht and even a £360 million Leonardo da Vinci painting.
MbS is believed to have a personal fortune of around £2.4 billion. Photo: Shutterstock
But his real power lies in the fact that he can command the financial power of the country's wealth fund and state oil company Saudi Aramco. The audacious takeover of golf and the desert kingdom's growing stable of top soccer players raises another question: Is there anything — or anyone — that MbS can't buy? Or is he going to become, as some call him, «the man who bought the world»?
Few who have met the crown prince feel that he lacks confidence. “He is undeniably charismatic, curious and interested in things,” says Justin Sheck, journalist and co-author of Blood and Oil: Mohammed bin Salman’s Relentless Quest for World Power. “He is in this strange position of being in charge of everything in his country. But he also radiates the belief that he is capable of anything.”
With the value of many global assets still at a low post-pandemic turmoil, and with many countries now in (or flirting with) recession, the Gulf countries are swimming in petrodollars due to the energy price surge caused by Vladimir's invasion. Putin in Ukraine. Many money-hungry corporations and sports organizations have begun to view the region as one of the few remaining sources of cash in the world.
According to the International Monetary Fund, Middle East gas and oil producers will see about $1.3 trillion in additional revenue over the next four years, higher than pre-war forecasts due to higher energy prices.
Cristiano Ronaldo has signed a contract with Saudi Arabian club Al Nasr that is reportedly worth $200 million a year. Photo: Getty
PIF has swelled from $150 billion eight years ago to about $700 billion today, and its foreign share has increased from less than 10% to 25% in about the same time period. This is by no means the limit of his ambition: by 2025, the fund is expected to have $1 trillion in assets under management, with nearly a third of that invested overseas.
The situation is reminiscent of 2008, when many global companies were crushed by the financial crisis and forced to go hand in hand into the Persian Gulf. The difference this time around is that the region's increasingly confident monarchies need no questioning and, armed with some of the biggest checkbooks in the world, are on the hunt for such assets that will strengthen their position on the world stage through the so-called » soft power.
In the past, the boon from Saudi hydrocarbons has been used to shower the population with subsidies, benefits, public sector wage increases and infrastructure projects. This was a form of social bribery and led to huge boom and bust cycles associated with world oil prices. With the growing likelihood that fossil fuel use will eventually be phased out, and the uprisings of the Arab Spring in many neighboring countries fueled, MbS embarked on a bold program of social and economic reform.
PIF spends huge sums both at home and abroad. Even those petrodollars that are used abroad are largely intended to attract know-how, technology and, ultimately, further investment to the kingdom. According to Gulf experts, a new mood of self-confidence and assertiveness reigns in the country; the prevailing view is that the country should be more open and ambitious. MbS clearly does not want to play second fiddle to other world powers.
View of the capital of Saudi Arabia, Riyadh Photo: Abdullah Al -Ace/Moment RF
However, not all of these investments paid off. “One of the most important things about a monarchy is loyalty,” Sheck says. «Yasir bin Osman Al Rumayyan was truly devoted to MbS and that allowed him to endure many mistakes.» For example, it is likely that PIF has been hit hard by its investment in SoftBank's Vision fund. In the year ended March, the fund lost 4.3 trillion yen ($32 billion), nearly double the amount it had in the previous 12 months.
Steffen Hertog, an expert on the Persian Gulf at the London School of Economics, said the PIF's activities should be of some concern. «We don't disclose much about the costs they incur,» he recently told the Financial Times.
For example, there are questions about whether the fund is in danger of over-expanding itself. One of MbS's most ambitious projects is Neom, a futuristic city being built from scratch on the Red Sea coast and expected to cost $500 billion. But some are suggesting that the final bill for a city powered solely by renewable energy could easily spiral out of control. The country recently set up a «spending efficiency center» in the hope that the city will get more bang for its buck. However, at this stage, it is unlikely that ROI is Saudi Arabia's top priority.
“If you buy celebrities — which is exactly what [the LIV-PGA merger] does — Saudi Arabia remains at the center of global pop culture,” Sheck says. “They just spend a lot of money to get attention. It's much easier than spending money to make money. At the moment this is not a problem because there are so many of them. But it sort of limits the amount of influence they buy.” For example, Argentinean Lionel Messi just turned down an offer reportedly worth $400 million a year. Joe Biden at the Al Salman Royal Palace in Jeddah. Photo: Shutterstock
However, this means a big shift. Previously, the kingdom preferred to remain out of the international community's radar. “It was very conservative, with a powerful religious establishment and a royal family who were happy to spend a lot of money on themselves,” Sheck says. “He didn't want to attract attention. Now it is.”
Does the amount of money that Saudi Arabia can give out at any moment protect the regime from criticism? In recent years, he has been condemned for the war in Yemen and the murder of journalist Jamal Khashoggi. “I think it has always mattered,” says Shek.
Those who want to understand why Saudi Arabia went all-in golf should not overcomplicate their analysis, however, according to Shek. .
< p> «You have to remember that this is an absolute monarchy,» he says. “This means that actions are often less motivated by deliberative process or strategy than by individual desires. And I think that in this case it is impossible to overestimate the importance of the fact that Yasser bin Osman Al Rumayan just loves golf very, very much. It's his favorite thing.»
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