A growing dispute over an OPEC+ decision to cut oil production risks causing lasting damage to US-Saudi political relations. Wall Street seems unperturbed.
JPMorgan Chase & Co. CEO Jamie Dimon and David Solomon of Goldman Sachs Group Inc. are among the US finance chiefs preparing to attend Riyadh’s glittering investment summit this week, a showcase for the crown prince of Saudi Arabia, Mohammed Bin Salman. Meanwhile, the White House is escalating a war of words, with Joe Biden threatening “consequences” for the kingdom for his role in cutting oil. production despite US objections.
The Future Investment Initiative, which seeks to attract billions of dollars to the kingdom, is again overshadowed by external events. Relations between the United States and Saudi Arabia are at their worst since the assassination of government critic Jamal Khashoggi in October 2018, the last time financial industry leaders refused the annual jamboree, sometimes referred to as ‘Davos in the desert’.
This should be Prince Mohammed’s time to shine. High oil prices and production volumes mean that Saudi Arabia’s economy is the fastest growing in the Group of 20. It has its first budget surplus since coming to power, allowing it to channel billions of dollars in stock markets and assets globally, and plan some of the world’s most ambitious construction projects. In a slowing global economy, all of this makes the kingdom an irresistible draw for financial executives.
“Wall Street pundits know their history well and they know the difference between short-term and political versus long-term and strategic,” said Talal Malik, chief executive of Saudi consultancy Alpha1Strategy. “With this kind of liquidity, it makes sense for US investment firms to increase their assistance.”
Despite talk of possible absences, there is little sign that US executives are walking away.
Even as White House officials accuse Saudi Arabia of helping finance Russia’s war in Ukraine and inflating fuel prices for Americans, members of the previous US administration are packing for Riyadh. Former Treasury Secretary Steve Mnuchin and former White House senior adviser Jared Kushner are scheduled to participate. They have raised billions of dollars from the sovereign wealth fund of the kingdom chaired by MBS, as Saudi Arabia’s de facto ruler is known.
Blackstone Inc. CEO Steve Schwarzman and Moelis & Co. founder Ken Moelis, who were close to Donald Trump and managed Saudi money and advised his government on deals, are listed as attending. Bridgewater Associates founder Ray Dalio will also attend, rubbing shoulders with Saudi officials including Energy Minister Prince Abdulaziz bin Salman and Public Investment Fund Governor Yasir Al Rumayyan, as well as senior regional executives such as Khaldoon al Mubarak of Mubadala Investment Co.
From Europe, the CEO of HSBC Holdings Plc, Noel Quinn, and the CEO of Societe Generale SA, Frederic Oudea, are listed as delegates, as well as the CEO of Standard Chartered Plc, Bill Winters, although skipping next month’s COP27 summit in Egypt. The Saudi event will also feature its largest Chinese delegation with more than 80 CEOs from the country.
Organizers are seeing “increasing interest from the US private sector to attend,” according to Richard Attias, executive director of the FII Institute. The event “has no political agenda” and “it is a coincidence” that the tension between the United States and Saudi Arabia is happening at the same time, he said.
For incoming bankers, this week’s event could be more important than in previous years, as the world’s biggest companies struggle to attract capital in an increasingly dark macroeconomic environment. With high inflation, rising interest rates, a global energy crisis and tightening credit markets keeping many investors on the sidelines, influential state funds like Saudi Arabia’s are more important than ever.
Before the current dispute with the White House, the PIF, as the Saudi fund is known, had been increasing its exposure to the US. in expansion his team in New York to manage a portfolio of approximately $40 billion of US stocks, including holdings in BlackRock Inc., JPMorgan and Uber Technologies. Elsewhere, the bottom driven his stake in Aston Martin Lagonda Global Holdings Plc in July, giving him a 17% stake in the British automaker.
“Our trade ties are a significant win-win component of the bilateral relationship,” said Steve Lutes, vice president for Middle East affairs at the US Chamber of Commerce. growing and succeeding in Saudi Arabia, so it is important that the trade relationship is insulated from any spillover effects stemming from political disagreements in Washington and Riyadh.”
For JPMorgan’s Dimon, this year’s FII will be the first after he and other top Western executives walked out of the conference in 2018 following the disappearance of Khashoggi, a dissident Saudi journalist. Dimon then said taking off “I don’t achieve anything.”
The US bank is expanding in Saudi Arabia with plans to boost its 100-person team in the kingdom with 20 new hires by the end of the year, more than double the size it had in 2016, according to Bader Alamoudi, a senior director at JPMorgan in the country. .
“There is still a lot of interest from local companies to list and from foreign investors looking to gain exposure to the Saudi market,” Alamoudi said. “Competition has definitely increased, but we have been here a long time and we will continue to invest in serving our customers and bringing new products and offerings to Saudi Arabia.”
Other US financial firms are expanding as the Saudi government rises Pressure in international companies to move their centers from the Middle East to the kingdom. Franklin Templeton is said to be planning to set up shop there and CEO Jenny Johnson, who will also be at the FII, has singled out the kingdom as a major expansion market for the asset manager.
For its part, Saudi Arabia hopes the FII will put Riyadh on the map as a global destination for deals, while also enhancing domestic investment, which has been limited. Although foreign direct investment has risen every year since the event began in 2017 to its highest level in more than a decade last year, it is mostly channeled into oil assets rather than backing ambitious new projects.
But some deals are being made. In 2017, the PIF and Blackstone agreed that the Saudi wealth fund would contribute up to half of a $40 billion US infrastructure fund set up by the asset manager. The kingdom also announced the launch of Neom, a new $500 billion city aimed at attracting new industries.
With the Crown Prince’s ambitious plans for the PIF to become even more influential with $1 trillion in assets by 2025, there is much more to be done.
“There is still a gap between leadership plans for FII to be a hub for attracting FDI and the reality that most of the US and European interest is in capital outflows,” said Ayham Kamel, head from the Middle East and North Africa in political risk consultant. Eurasian group.
“Global finance executives have started to see some opportunities in the modernization plans, so there is a change in perspective. However, this year, like many before, they will likely walk away with valuable business gains.”
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