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WWhile Mohammed bin Salman was touring the United Kingdom and the United States earlier this year, the Crown Prince of Saudi Arabia – and his de facto ruler – could have relied almost exclusively on companies backed by the government's money. kingdom.
By disembarking in London, MBS may have abandoned its chauffeur-driven car, traveling through the capital via Uber, while its staff was finalizing its route on smartphones equipped with chips designed by Cambridge's ARM Holdings. After the bank heads were happy in the city, the investment plans they had discussed could have been further developed with the Slack cloud desktop app.
In the United States, at an Accor hotel, MBS and his entourage might have made a plate of Saudi rice dish, kabsa, from the DoorDash delivery service. Later, they could have relaxed playing computer games designed in part by the improbable simulation technology company.
Each of these companies is part of the portfolio of the Riyadh Public Investment Fund (FIP), which manages the country's oil wealth. Under the leadership of the young prince – he is only 33 years old – the FIP has adopted a more aggressive investment approach, looking for eye-catching and forward-looking contracts, especially start-ups. up technological. Its goal is to increase the pot from $ 250 billion to $ 2 trillion over the next 12 years.
This strategy is a key element of Vision 2030, a plan to reduce Saudi Arabia's dependence on oil and diversify its economy into sustainable industries with a long-term future. But the plan did not go smoothly.
"The idea is that you give the money to the private equity fund and invest heavily worldwide, especially in forward-looking, high-tech industries," said David Butter, analyst for the Canadian investment bank. Middle East and North Africa at Chatham House.
"But a sovereign wealth fund is by definition based on surplus revenues and Saudi Arabia has run deficits because of low oil prices. [the money] from somewhere else. "
Butter points out that Riyadh wanted to accelerate its projects by raising $ 100 billion by taking a 5% stake in its oil giant, Aramco, an offer already suspended.
But even if funds can be raised elsewhere, the component of the international program on international investments is threatened because of allegations – denied by the Crown Prince – that he ordered the murder and dismemberment of journalist Jamal Khashoggi.
The keystone of the international strategy – which could now be threatened – has been to provide the kingdom with almost half of the $ 93 billion Vision Fund, managed by the Japanese company Softbank. Much of this money has been invested in future leading companies such as Uber, the Lucid Motors electric car start-up and General Motors' driverless auto unit, GM Cruise.
MBS is close to the general manager of Softbank billionaire Masayoshi Son, one of the few business executives not to have withdrawn from next week's Future Investment Initiative (FII) in Riyadh – described as "Davos in the desert" – in light of the allegations. But the terrible scandal seems to have tested even this close relationship.
Earlier this month, MBS told Bloomberg that the FIP was ready to inject an additional $ 45 billion into a second Vision fund. At the end of last week, Softbank seemed to have cooled the idea. Its chief operating officer, Marcelo Claure, said there was "no certainty" that such a fund was in sight.
An impressive list of business names was a little less cautious about the distance to MBS.
JP Morgan's Jamie Dimon, Glencore President Christine Lagarde, Glencore Chairman Tony Hayward and many others, including Uber boss Dara Khosrowshahi, are among the most important withdrawals from the group. FII, despite the $ 3.5 billion investment of the FIP in his company. In addition, Richard Branson has suspended the $ 1 billion investment by the Gulf State in its Virgin Galactic space project. Rarely have we seen so many business leaders run in the same direction, quickly moving away from Saudi Arabia.
All of this is causing considerable damage to the public profile of a man who was to be the standard bearer of reform and modernization. When MBS was in California for his tour, he rented most of the Four Seasons hotels in Beverly Hills, lunching with Rupert Murdoch, Facebook boss Mark Zuckerberg in Silicon Valley, and starring movie stars.
"The character he was trying to unveil was that he was one of them, these business magnates. It was obvious that he loved to hang out with all those big names, "says Butter.
"It's really a prestigious goal and they've been explicit about it," says Rachel Ziemba, an assistant researcher at the Center for a new think tank on US security. "There is a desire for economic power and an effort to invest in the advanced technologies that they hope to use in Saudi Arabia, but which also place them on the front page of the paper."
The economic ramifications are even more crucial than prestige, and not only when it comes to increasing returns on investment from the FIP. Each overseas agreement provides international links that contribute to the realization of Vision 2030 national plans.
These include a massive expansion in solar energy as well as cultural and technological development, not to mention the so-called Giga projects, such as building islands in a tourist complex along the Red Sea coast and a new futuristic city, Neom, in the far north-west of the country.
Achieving these goals requires expertise that the realm does not necessarily have, can not grow quickly and needs to import instead.
A memorandum of understanding signed with the UK after MBS's visit early this year provides insight into how Riyadh is considering a symbiotic relationship between domestic investment and domestic projects.
The document was full of mutual eulogies. The UK has recognized "Saudi Arabia's considerable potential as a global investment power," while the Saudis have recognized London's "incomparable" place as a financial center, a position the capital has quickly lost to New York.
However, the agreement focused on "mutual investment opportunities" worth $ 100 billion over 10 years, including $ 30 billion in direct investment in the United Kingdom from the United States. FIP. In exchange, the UK will share its expertise in the areas of clean energy, electric vehicles, financial services, culture and entertainment, healthcare, life sciences and, of course, defense. .
None of these partnerships will likely involve companies currently fearing that Saudi Arabia will be toxic.
"There is a limit between not going to a public event [the FII] and what's happening with real cash investments, "says Ziemba. "But for some investors, this is another example of uncertainty about Saudi foreign policy.
"They may have more difficulty attracting foreign investment than placing them abroad with companies that usually need this money."
Nigel Kushner, general manager of W Legal and a sanctions expert, warns that the worst case scenario for the Saudis is that the United States decides to include individuals and companies on the list of people sanctioned under the Magnitsky law.
"The reality is that international affairs would be closed for anyone on the list," said Kushner. "If they added to the list of businessmen or companies, that would have a significant impact: everything could be removed overnight if the US had the will to do it. But I doubt that this will be the case. "
A large portfolio
The immense oil wealth of Saudi Arabia and its royal family has been widespread in the world in recent years. Much of their holdings abroad are held by the huge $ 93 billion Vision Fund, shared with the Japanese bank Softbank, while some are personal toys of various royals.
These are some of the assets, ranging from steel to Silicon Valley.
The Vision Fund
Saudi Arabia has invested $ 45 billion in the $ 93 billion Vision Fund, the world's largest private equity fund managed by Softbank. The investment vehicle has provided liquidity to over 25 companies, including technology startups and champions such as Uber – the Vision Fund is the largest shareholder of the $ 9 million application. The sovereign investment fund of Saudi Arabia, the Public Investment Fund (PIF), holds 5%, worth $ 3.5 billion.
ARM Holdings is the second largest investment in the Vision Fund. The Cambridge-based technology company designs chips used in millions of smartphones around the world. The Vision Fund holds a 25% stake, worth $ 8.3 billion, as well as $ 8.2 billion from its co-owner Nvidia.
It also invested $ 2.3 billion in GM Cruise, the driverless division of General Motors, and $ 4.4 billion in the WeWork workspace company.
The improbable London start-up, which creates virtual worlds for video games, received $ 500 million from Softbank, which was then transferred to the Vision Fund.
Slack, perhaps best described as a Facebook for business, is a cloud-based virtual office that has won a $ 300 million injection. Vision Fund's other investments include the $ 500 million DoorDash food delivery service, the $ 460 million German auto dealer Auto1 and the $ 1 billion biopharmaceutical company Roivant.
Blackstone Infrastructure
During President Trump's visit to Saudi Arabia last year, it was announced that the FIP would invest $ 20 billion in a $ 40 billion US infrastructure fund managed by investment giant Blackstone. The project is in its infancy and is struggling to find the right investments.
Other investments
The PIF has also sought out technology projects beyond the scope of Vision and holds a 5% stake in the electric car manufacturer Tesla. He has also joined renowned sponsors to invest in Magic Leap, a secret startup of augmented reality, with a budget of 400 million dollars. She also holds interests in steel through a subsidiary of ArcelorMittal.
Personal investments
Some members of Saudi royalty are big full-fledged investors. Prince Al-Waleed bin Talal spent $ 25 million for a 2.3% stake in Snapchat, plus $ 267 million for shares in the Deezer streaming music service. He already has stakes in Twitter and the Lyft mobile phone service.
Then come the usual personal thrift stores, such as the $ 300 million French castle of Mohammed bin Salman and a yacht that costs even more, at $ 500 million. But they seem barely worth mentioning.
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