Charting the (Geo)political Coordinates of Saudi Investment in Spain

Eduard Soler

6 mins - 22 de Septiembre de 2023, 07:00

The arrival to Telefónica of the Saudi mobile phone company, itself controlled by the Saudi sovereign wealth fund, has aroused interest in Spain about this Arab country, about its form of government, about its underlying tensions of such a decision, or about the implications it might have in terms of ethics or national security. The Saudi bid can be read from an economic rationality and the search for profitability, but it can also be read politically. This and other operations promoted by the sovereign wealth fund illustrate the intensity and direction of some of the changes taking place in Saudi Arabia. Let us analyse, one by one, the coordinates that help us understand the political and geopolitical significance of this type of operation.

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We must first look at the Saudi political context. Its political regime is not a democracy, nor does it pretend to be. Political parties are banned, and power is held by the monarchy, with no accountability nor separation of powers. This is not to say that there are no factions or that there is no room for change. Indeed, internal power balances are being upset. For the first time since 1953, succession to the throne will not be between brothers but from father to son. In 2017, via royal decree, King Salman replaced his brother with his son in the line of succession, and family members were called to order through an anti-corruption campaign that included the arrest of several royals in a luxury hotel. It was a warning to sailors that the crown prince, Mohammed bin Salman – often referred to by the acronym MBS – was now in charge and would not tolerate palace intrigue. MBS terrorises his rivals and, at the same time, tries to curry favour with the population by launching a modernisation programme and building a new narrative for the country. MBS is a young man in his thirties and aspires to reign for many decades. This time horizon favours investments that will pay off in the medium to long term.

This investment seeks economic modernisation and diversification, and, once again, this is politically motivated. Saudi Arabia has based the functioning of the state, its relationship with its citizens, and its international projection on oil revenues. These have provided its ruling class with resources that have allowed it to buy almost everything, including the wills inside and outside the country. Although the current episode of high energy prices could blind us, Saudi Arabia senses that its extreme dependence on a single source of income is becoming too risky, and even more so if the political, social, and environmental pressure for decarbonisation on a global scale increases or if renewable energies continue to become cheaper. On this premise, the smart thing to do is to invest oil revenues in other sectors before it is too late, so that they continue to fill the state’s coffers. Within this strategy, the technology sector is particularly attractive.

The third coordinate lies in changes in the power structure of the international system. For more than six decades, Saudi foreign policy pivoted on a preferential relationship with Washington, based on the premise that the Americans would guarantee their security if Riyadh provided them with energy security. Short of a breakdown, this symbiotic relationship has cooled. There is no single factor or event, but rather a sum of many elements: the attacks of 9/11, the emergence or return of other global powers such as China, Russia, and India in a more multipolar world, the development of the oil and gas industry in the United States, the Saudi perception that Washington had disregarded Saudi interests in the negotiation of the Iranian nuclear deal, and the political uproar over such scandalous crimes as the murder of journalist Jamal Khashoggi in the Saudi consulate in Istanbul. As part of the distancing process, Riyadh is pulling up the anchor and sailing to other ports – among these – European ones. In the midst of the war in Ukraine and with energy prices soaring, the Saudis feel more desirable and believe that pragmatism and political urgency will prevail over all other considerations. This is their moment.

The fourth coordinate invites us to focus on changes in the Middle East and especially in the Gulf. By history, size, and population, Saudi Arabia feels it is a kind of big brother and aspires to have this primacy accepted as a matter of course by the other Gulf dynasties. However, Qatar, and more recently the United Arab Emirates, have demonstrated ambition and the ability to act autonomously on issues that are sensitive for the Saudis. Both countries and their rulers much earlier embraced the rhetoric of modernisation, technology, connectivity, and economic diversification. Qatari and Emirati sovereign wealth funds have long invested in large European companies, including several Spanish ones, and these stakes provide economic returns but also reputation and access to politically well-connected companies and individuals. Saudi Arabia wants to gain respect and regain lost ground in the peculiar competition with its neighbours, including in the area of investment.

The last coordinate brings us closer to home. Is Telefónica’s Spanishness a relevant factor? What is clear is that it does not play against the Saudi decision. Despite some controversies that have even affected the Spanish head of state and civil society campaigns to restrict arms sales to Saudi Arabia, bilateral relations between the two countries are long-standing and robust. The Saudis perceive Spain as a friendly country and note that there are actors in the political and economic arena who are keen to preserve this relationship and the economic benefits that derive from it. In any case, if Telefónica’s venture comes to fruition, it would add a new dimension to the special Spanish-Saudi relationship. To the old “diplomacy of kings” and a more recent “diplomacy of contracts”, the Saudis would add an ambitious diplomacy of investment.
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