Beginning Tuesday, the financial industry's powerful and influential will meet in Saudi Arabia for an event. In contrast to 2018, many Wall Street celebrities will also be attending. The desert monarchy is no longer a pariah for them.
Relations between the United States and Saudi Arabia are in crisis. So much so that earlier this month, US President Joe Biden threatened the traditional ally of the United States with consequences. The White House wants to review relations with the Saudi capital, Riyadh after the OPEC+ oil cartel announced it would reduce global oil production.
Such a decision plays into Russia's hands, Washington officials said, expressing serious disappointment with Saudi Arabia, the most important member of OPEC+.
While political relations have reached a low point, the banking Mecca on Wall Street is clearly on a roll. The call of the desert beckons, or perhaps it's the Kingdom's fabulous wealth that is the draw, promising to open up numerous promising business opportunities. This week, some of the most important US financial stars are traveling to Riyadh, for an annual event dubbed «Davos in the desert.»
Financial Celebrities
Jamie Dimon, head of the US's largest bank JP Morgan, Blackstone co-founder Stephen Schwarzman and David Solomon, chief executive of Goldman Sachs, are among the figureheads at the «Future Investment Initiative,» which begins Tuesday. The Wall Street bigwigs are among numerous Western executives who will speak at the conference. Ray Dalio, founder of Bridgewater Associates, the world's largest hedge fund, will also be there as a speaker.
The financial giants cannot resist the lure of sharing in the kingdom's oil wealth. They thus supported Crown Prince Mohammed bin Salman's most important annual investor event, «MBS.» The Biden administration, on the other hand, is generally not as friendly to the Saudi crown prince as Donald Trump's administration was before.
Tempi Passati
The crown prince and heir to the throne, who by royal decree is also the prime minister, wields wide influence. Meanwhile, he is also linked to the murder of Saudi journalist and dissident Jamal Khashoggi.
The reputational damage Saudi Arabia has suffered because of this also weighed on the Future Investment Initiative in 2018. At the time, several high-profile financial executives canceled their participation in the investor congress, including Dimon. The scandal surrounding the journalist's murder also kept former Credit Suisse CEO Tidjane Thiam from attending the gathering of the powerful in Saudi Arabia. However, the Swiss bank was prominently represented there in the following year, 2019.
Credit Suisse and UBS told finews.asia separately that no one from the respective bank would be speaking at the event.
Petrodollar Gusher
While the International Monetary Fund and the World Bank are warning of a global recession, petrodollars in Saudi Arabia are currently gushing more than they have in some time. Saudi Arabia is experiencing its first oil boom in nearly a decade as crude prices have soared in the wake of the Ukraine war, and projections are that the kingdom will be one of the fastest-growing economies in the world this year.
«In a world where capital markets are shut and investment bank earnings are down, the Gulf warrants attention,» an executive at a US bank told the «Financial Times (paywall). The huge petrodollar profits come at a time when Riyadh is pushing an ambitious plan to restructure the economy and develop the conservative kingdom, he said.
The Public Investment Fund (PIF), chaired by Prince Mohammed, is one of the most active state investment vehicles in the region. The fund has pledged to invest $40 billion annually in the kingdom while overseeing several megaprojects. It also buys foreign assets.
