Saudi Arabia is celebrating one of the biggest foreign-investment windfalls in its history after netting more than $12 billion by selling off a stake in the oil pipelines that traverse the desert kingdom.
But the country may also be facing an uncomfortable reality as a result. As carefully cultivated relationships with firms such as BlackRock Inc. and SoftBank Group Corp. have yet to draw in the desired investment, it’s turning to the jewels of its energy industry to attract new money.
Last week’s sale of the stake to EIG Global Energy Partners LLC shows how reliant Saudi Arabia is on its traditional mainstay and the challenges Crown Prince Mohammed bin Salman faces in diversifying the country away from oil and gas to achieve his Vision 2030 goal. The likes of BlackRock and SoftBank haven’t invested back into the country as much as the government might have hoped, while foreigners favor revenue-rich energy assets over tourism and entertainment.
“Entertainment and tourism might have had a better year of foreign direct investment in 2020 if Covid had not happened,” Karen Young, resident scholar at the American Enterprise Institute in Washington, said via e-mail. “But all the same, the core investors who see value in Saudi will be interested in the largest and most profitable sector, and that is still very much oil and energy.”
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