Saudi Arabia is using its oil wealth to invest huge sums in other countries, apparently to diversify its own economy. Critics are concerned that the build-up of financial muscle abroad could be used for political ends. Cathrin Schaer reports
There are regular calls to boycott Saudi Arabia because of the country's well-documented history of human rights abuses. But anyone trying to do that will have a tough time if they're also determined to avoid the country's international investments.
Over the past six years, these have increased substantially. Saudi Arabia's sovereign wealth fund – that is, its state-owned investment fund – now holds shares in all of the following companies: Amazon, Google, Visa, Microsoft, Disney, Nintendo, Uber, PayPal and Zoom, to mention a few.
It also owns the holiday company, Carnival, English Premier League football team Newcastle United, a controversial professional golf tournament, and it has a significant relationship with BlackRock, the world's largest asset manager. In fact, every time you buy a caramel mocha latte at Starbucks, or play the online game World of Warcraft, you are also supporting Saudi investments.
Radical change
The reason Saudi Arabia has a stake in all of these well-known 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, the Saudi fund mostly made low-key domestic investments and was not a major international player.
That all changed around 2015 when Saudi Arabia's de facto ruler, Crown Prince Mohammed bin Salman, often simply called MbS, began to consolidate the kingdom's wealth under his own name. MbS made the PIF central to his plans to modernise the country and diversify its economy away from oil.
In 2016, the fund first made global headlines for investing €3.1 billion in the ride-share company, Uber.
In 2019, Karen Young, a senior researcher at Columbia University's Center on Global Energy Policy, noted that the PIF's new role in the Saudi economy was "unprecedented" in a report for the Washington-based Project on Middle East Political Science: "It is the central engine of growth in the new Saudi Arabia, as envisioned by MBS. State resources are directed to feed the PIF and state assets are being sold to raise cash for the PIF”.
Besides giving MbS a way to change things fast and make money quickly, the PIF also provides the Saudi prince with "a very strong hand against internal dissent or alternative ideas about the appropriate role of private enterprise", Young argued in the 2019 report.
Major ambitions
According to the fund's publicity materials, the ultimate goal is for the PIF to become the largest and "most impactful" sovereign wealth fund in the world by 2030, with assets worth $2 trillion. It currently has around $608 billion, more than four times as much as it had back in 2015.