Riyadh wasted little time in setting the tone for bilateral ties with the United States. Just days after the inauguration, Crown Prince Mohammed spoke with President Trump, promising $600 billion in investment over the next four years. The figure is roughly in line with the gross domestic product of Sweden or Argentina; it is somewhat bigger than the annual output of Arizona or Colorado.
The challenge is to figure out where that money might actually be allocated and through what mechanism. Details are scant. Most likely, the Public Investment Fund will have a hand in distributing funds, given its heritage in international markets. “Invest” could quickly translate into “purchase.” There may be a few sports teams or video-gaming companies on that buy-me-now list.
The sizeable commitment is out-of-school for Saudi Arabia at this time. In October, a spokesman claimed that Public Investment Fund would curtail its international activity in favor of an investment strategy centered on domestic policy requirements. While a cash allocation of this size is more than a simple move by the sovereign wealth fund, their approach echoes grassroots sentiment within the Kingdom.
There assuredly is an open window to invest in those American opportunities that advance Saudi development goals or strategic interests. Obvious choices include entertainment and green energy. Given a flip-flop in US policy on fossil fuels, there may even be room for oil-related investments. We note that Saudi Aramco owns one of the largest refineries in the nation at Port Arthur, Texas.
Startups assuredly will be on the list to emphasize business range and policy alignment. $600 billion is largess in the extreme; a slice for Silicon Valley will have an enormous impact. In 2016, Crown Prince Mohammed skipped through Washington for a more meaningful trip to San Francisco, holding private meetings with technology leaders. Those ties endure.
Digging deeper, chances are that defense startups will feature prominently in the shopping spree, especially given the ongoing military buildup in the Gulf. The crown prince was at one time the Saudi defense minister. He and his analysts likely keep a keen eye on developments in El Segundo, California, an epicenter of the defense and aerospace industries.
Lavish affinity with America may signal an ostensible shift away from the Xi Jinping regime. China is Saudi Arabia’s biggest trading partner because of the oil trade. Officials have been eager to build on that commodity-based foundation. Indicative of the times, a high-profile Saudi delegation visited Guangzhou in September to explore joint-venture opportunities with GAC Group, the fifth largest automobile manufacturer in China, and Huawei, the telecommunications equipment giant.
The announcement is a slap in the face for the now-passé Biden administration, given then-frosty relations with Riyadh. Crown Prince Mohammed and President Biden did elevate their relationship from a nod to a handshake over the post-pandemic period. Still, White House concerns over human rights abuses overshadowed any fresh ability to find common ground.
President Trump has lively ties with the Kingdom, dating to his first term, albeit heavily skewed toward commercial interests. In December, the Trump Organization licensed its brand to two new real-estate projects in Riyadh. The buoyancy of the relationship is among the reasons why the White House could prioritize Saudi Arabia as a first overseas destination, rather than a more traditional trip to Canada or Mexico. ■
Our Vantage Point: Saudi Arabia may be America’s new best friend with a burgeoning wallet. While we have yet to understand how and where their goodwill money will be spent, we can make reasonable conclusions based on their domestic priorities and ongoing interests.
Learn more at the Financial Times
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