Why Is Saudi Arabia Buying All These Football Players? & Why Does It Matter Beyond Football?
Saudi Arabia is undergoing a massive transformation at the moment. This has serious implications for Saudis themselves but also a lot of industries and people beyond the Kingdom's borders.
Countries don't transform themselves frequently and rich and religiously conservatives ones do so even less frequently, as a rule. So, this has been notable on a few fronts but, despite all the publicity, there are a number of aspects that are still flying under the radar till now.
For one thing, it is very under-appreciated that this transformation has profound implications outside of Saudi Arabia, not just inside.
More precisely, Saudi Arabia is attempting to influence the world in a profoundly different manner from its past behavior. It is downgrading its long standing tradition of acting as an exporter of its unique fundamentalist brand of Wahhabi Islam and in its place it is instead rapidly developing a role as investor, buyer and developer of Western cultural assets.
This is new and its proving very uncomfortable for many, especially in the West.
We are not ready for this new Saudi Arabia abroad and, as we are finding out, the Saudis are not waiting for either our permission or even our awareness. They are acting boldly and shaking things up with impressive vigor and decisiveness.
For Saudis it is nothing short of a revolution in the way things normally operate.
For the West, we are finding out in real time very real some of the downsides of our decision to export our energy production to unpredictable and opaque regimes and send our petrodollars to large state owned foreign oil companies.
You think you don't like ExxonMobile? Wait till you find out more about SaudiAramco! Oh wait, you can't find out much because it is an arm of a foreign state who doesn't care about pleas from activists (or shareholders) for transparency and renewables pledges.
The transformation hasn't yet extended to Saudi having much of a pride month.
As regular readers know, one of the longest running arguments has been that we should be more pragmatic and thoughtful about our energy policy.
For new subscribers - and we have quite a few! the argument could be summarized as:
Reducing fossil fuels use is both critically important and fiendishly difficult with very high costs if you do it either too fast or too slow.
Why?
Well, if you reduce our reliance too quickly you will inherently raise your energy costs. And if you do it too slowly you will both cook the planet and also miss out on a cheaper energy revolution using the *near free* wind and sun.
The Biden administration has made a very public and very welcome departure from the previous Trump Presidency's "Ostrich-head-in-the-sand" approach to combating climate change but they were so full of righteous environmental zeal that they forgot that you can't just wish away oil demand.
This has had some nasty consequences. Right up there at the top has been a lot of Western oil expenditure being spent on non-Western source and piling up in non-Western states coffers.
Saudi Arabia is right at the top of that list. And it is what they are DOING with that capital that is proving so interesting.
Under Crown Prince Mohammad Bin Salman, commonly known as "MBS," there have been momentous and rapid changes to Saudi society.
Most famously and perhaps most wonderfully for Saudi citizens the repressive religious police have lost a lot of power. Even better, the Crown Prince has announced - and more important still, begun implementing - a host of significant social and economic reforms under the title of Vision 2030 that have equally shocked residents of the Arabian Peninsula and stunned outside observers.
The list is long but some highlights might be: Women are driving for the first time, unaccompanied men are allowed to enter previously female spaces like shopping malls and concerts are suddenly happening and, more incredibly still, there is dancing permitted at these performances.
Desert raves are becoming a thing in a country that still executes prisoners, including for homosexuality.
Most incredibly, a beach resort near the new planned tech city of Neom is expected to receive the first ever Saudi liquor license. It is still difficult to truly believe that this modernization will occur but all bets are off.
What gets a bit overlooked is that what appears like a social revolution to outsides is also supposed to be an economic revolution as well.
And one of the key pillars of the economic transformation is to make Saudi Arabia a center of the modern day secular religion in the West: sports. This is where the rubber hits the road.
In typical Saudi fashion they are doing so by spending a lot of money but unlike the past they are being far more strategic and comprehensive in both their vision and execution.
This is leading to a sports world - and sports fans - reeling in shock as a large and very determined new financial player has been systematically disturbing business-as-usual in sport after sport.
The Saudis have already launched an incredibly well funded league to take on the PGA and the golf establishment that led to a near civil war in the sport. They have also moved strongly into boxing and have serious plans for motorsport as well.
But it is in global football (soccer in english-speaking North America) that they have really stunned not just sports executives but clubs and fans all over the world.
It began with Cristiano Ronaldo, one of the best players ever he is now no longer capable of commanding the same wages at the top clubs in Europe. The Portuguese magician arrived in the Kingdom to make $200 million a year and see out the end of his glittering career.
But then thing started to truly get interesting. Real players in the prime of their careers began being offered multiples their current (already very good) wages to pick up and move to a Saudi club. Another Portuguese star, Ruben Neves, is a good example. Only 26 and coveted around Europe for his quality, he nevertheless decided to pack his bags for the Middle East.
The reason was simple: the salary was just too good.
As the other big names have piled up - Benzema, Kante, Henderson, Firmino, Neves, Mendy, Mahrez, Koulibaly are some of the most well known, full list here - it has become clear that this is neither a temporary blip nor just a few players lured by a better deal and an easier life than they would have in the top European leagues.
What hasn't been fully appreciated is that this is a very different experience from the past eras of Saudi oil-fueled excess. It isn't just that Saudi soccer clubs (or boxing promoters etc) have more available cash because of high oil and gas prices.
It is the fact that they have the power of the state behind them.
THAT is a game changer. In sport after sport, it isn't just Saudi money flowing from state coffers but rather the Saudi state itself that is carefully thinking about how to become more closely owning AND operating these sports.
So, this is a sea change and a serious one for the global football community and the global football business.
The Saudi state is getting officially involved in the Saudi football (soccer) league and doing so in a big way. The state backed sovereign wealth fund, the $650 billion behemoth Public Investment Fund, has purchased majority stakes in 3 of the biggest clubs and that is leading to a different and far more muscular approach in investing and expanding the Saudi football league.
This new phenomenon of Saudi clubs buying big name stars is - rightly - leading to charges of sportswashing from many activists, offended sports fans and commentators around the world.
Sportswashing is happening and is a real problem but by focusing on it we risk missing the larger point of what is going on here.
Yes, Saudi Arabia is trying to clean up its image but it is trying to do far more than a superficial publicity campaign. Once again, the Arab Kingdom is trying to transform itself.
Rightly or wrongly, MBS and his advisers view sports as well as other prioritized industries such as tourism (!), renewables and even video games (?!) as the future of Saudi Arabia economically and also nationally.
The latter point is important because as with all revolutions there are real risks.
The big problem with MBS's effort to transform the country is that modern Saudi Arabia has been historically kept united by adherence to its religion and one that was backed up by strict authoritarianism. If that is no longer going to be the case - if the religion will be de-prioritized at least somewhat - then something else has to fill the void and it better be something both popular and universal, just like religion.
Therefore it isn't too shocking that the most modern of secular religions, sports, something not banned in Islam, has a certain attraction to it.
We aren't sure sports will be enough but there is no denying that Saudi Arabia is a sports mad country and they also have billions and billions of dollars to throw behind the state funded effort.
i.e.: it could fail but they could do it for a looong time before we get there.
It also won't just be happening on the Arabian Peninsula either.
MBS and his team want the Saudi brand to be synonymous with sporting excellence not just domestically but internationally as well. Saudi racing teams, Saudi MMA teams, Saudi cycling pelotons, Saudi golfing leagues, Saudi sporting academies, you name it.
To help support this vision, the Public Investment Fund has just announced a multi billion sports investment group which will look to buy stakes in sports franchises and businesses (training, agents, marketing etc.) around the world.
This is causing a lot of people in the industry to see dollar signs and imagine another dollar rush. Others are worried about what a very wealthy state-backed competition could do in a geopolitical sense. Should an authoritarian and opaque state own many (any?) assets in a legalized monopoly that commands not just the dollars but also the passions and loyalty of millions of people around the globe?
Cristiano Ronaldo has now experienced the wealth and outlook that goes with selling fossil fuels to Western nations. Many of the rest of us are going to find out what that looks like too.
Until them, does anyone know where to watch Al Etifaq vs Al Nasser and at what time they play??
*******
Have questions? Care to find out more? Feel free to Download our App (!!) or reach out at contact@pebble.finance or join our Slack community to meet more like-minded individuals and see what we are talking about today. All are welcome.
