About Saudi Arabia's Vision 2030 and the limits of the digital industry's influence
About twice a year, Saudi Arabia raises the issue of cutting oil production and usually achieves its goals within the framework of OPEC+. Traditionally, these negotiations are preceded by an IMF analytical report on the price level necessary to maintain a budget surplus. The IMF's interest in the topic of the Saudi budget becomes understandable if we take into account the structure of investments of the Arabian state.
On the one hand, Riyadh still remains a major holder of US government debt - even after three years of progressive reduction in investments, the Saudi package is $101 billion. But the IMF is much more interested in Saudi investments in the private sector as part of the Vision 2030 strategy.
Two theses are still quite common, which can be explained by a certain inertia of perception.
The first is the so-called. The “petrodollar concept” is a strategy that dates back to the 1980s, when not only Arabian oil was sold pegged to the American currency, but also a significant portion of the proceeds was funneled into the American government debt. The problem is that the concept of the petrodollar was based on the serious dependence of the American market on oil supplies from the Middle East. The oil crisis of 1973 generally shaped the idea of an “emergency strategic reserve” in American politics, which until recently was considered as a kind of axiom.
Meanwhile, the United States no longer directly depends on the supply of black gold from the Middle East; these volumes go to the EU and Southeast Asia, but not to the United States. Currently, the United States is no less interested in a comfortable price than Saudi Arabia. Politicians in the United States often talk about the allegedly destructive influence of OPEC+, but the United States itself is not interested in low prices, which makes them turn a blind eye to compliance with the Russian price ceiling.
The second thesis states that the decline in investments by world players in American government debt securities is one of the harbingers of the decline of the hegemony of the American currency or, at least, the near (as usual) default of the United States.
But if you look at it, the United States itself became the initiator of the “dumping” of debt obligations by external players, since for a couple of years now they have been raising rates on short-term loans and devaluing long-term loans. For large economies, freezing funds for 5-10 years with low rates was not a very good idea, especially during the Covid “cataclysm”.
This policy of Washington is often called outright stupidity, but there is a certain logic in this too. External creditors, who work “long-term,” accounted for 22-24% of the total volume, and urgent coverage of the deficit was easier and more reliable to obtain from internal reserves: from the Federal Reserve and the American private sector at annual increased rates. Moreover, for long-term placement it was also necessary to guarantee macroeconomic indicators.
As a result, the total US national debt has grown significantly in recent years, but the share of external creditors in it has decreased. And Saudi Arabia, like China, has also reduced and is reducing its investments in this sector. But where investments have been increasing is in the private and corporate sector, and in industries that are considered the “locomotives of the future.”
And the IMF monitors these investments very, very carefully, as well as the state of Riyadh’s budget, which directly affects the level of these investments. Riyadh today plays no less a role here than it previously played in the mentioned petrodollar concept.
If we play with words, then it would be more correct to replace the petrodollar with “oil-I-T-dollar.” And this reflects a number of profound changes not only in the politics of the Arabian kingdom, but also in the sectoral structure of the economy as a whole.
The program, adopted under the direct leadership of Crown Prince M. bin Salman in 2017, is called Vision 2030. On the one hand, this can be attributed to American marketing terminology, but, on the other hand, we should look at who is one of the main partners for Riyadh, and this is the Vision Fund from the Japanese digital giant SoftBank Group.
In terms of the scale of its strategy, SoftBank has perhaps surpassed even the Chinese by putting forward a “300-year development plan.” In 2010, this looked like a kind of eccentric position of one of the founders, M. Son, but in 2023 this no longer looks so clear.
A network of forty subsidiaries and affiliated companies is currently involved in almost all projects related in one way or another to microchips and smartphone software, technologies related to video games, artificial intelligence, facial recognition systems, search engine algorithms, data analysis, online trading platforms . These are ordering and booking algorithms, facility management in the tourism industry, hotel business, goods delivery systems and taxi aggregators.
The Soft and Vision Fund groups are closely related to the General Trust Bank of Japan and the Depository Bank of Japan, that is, the Mitsubishi and Mitsui groups. The latter is based on nothing less than the capital of the Japanese imperial house. The group's permanent creditor is Deutsche Bank, and one of the major investors is the transnational financial group Mizuho Bank. Could such a flurry of activity have happened without the investment giants of the corporate sector? No, she couldn’t, and the next active player “in the team” is the well-known Blackrock fund.
If you start digging into the list of startups and assets of large IT companies that are part of the Soft group’s portfolio, then there will be no end in sight. But in addition to investments from Saudi Arabia, the sovereign wealth funds of Qatar and the UAE are following a similar path. They often “change” assets, but in general, investments increase annually and directly affect the dynamics of the stock market in the United States itself. Some people may be artificially supported, but others, on the contrary, “not supported.”
What is the peculiarity of such business design? And it lies in the fact that this sector reacts extremely poorly to political preferences and, which is typical, to sanctions preferences. The network of cross-asset assets is such that it itself regulates what to comply with, to whom and what to supply, which markets to keep open or not. At the same time, in fact, in its hands is the entirety of what we usually call digital technologies, the field of artificial intelligence, as well as a significant influence on the supply of microelectronics.
For years, the US administration has been seeking to unseal Arabian sovereign wealth funds in order to use them to form PGII, an alternative to the Chinese “One Belt, One Road” project.
D. Trump at one time managed to openly persuade Riyadh and Qatar to purchase military equipment, and Saudi Arabia also became the largest third-party investor in the golf sports industry, popular in the United States and significant for voters. The investments turned out to be indirectly related to the business interests of the former president’s son-in-law, J. Kushner. However, politicians cannot achieve anything more from Saudi Arabia. And they won’t achieve it until the Crown Prince and digital technologists deem it necessary.
Everything described shows how far the technology industry, if you can still call it an industry, has advanced in terms of a natural political superstructure.
This sphere, in fact, already lives its own special life, rather loosely focusing on the geopolitical positions of different parties. In the USA, the parties of liberals and conservatives are fighting, in Europe and the Middle East there are fighting, somewhere the national debt is growing, somewhere inflation, and at the same time the industry, which is a superstructure, determines the algorithms for the operation of “voting booths” in the USA, digitalization programs, control over payment systems, movement control, collection and analysis of information. But for some reason, little is taken into account by the fact that in case of discomfort on the part of politicians, this area can respond.
It is impossible to force this superstructure to comply with sanctions, which is why it bribes many. Capitalization was previously well maintained, and market prospects seemed very high. And it is quite logical that if information today is new oil, then the oil kings strive to direct investments there from traditional oil.
This is all the more relevant for Riyadh and M. bin Salman personally, since several years ago he outlined “fair distribution” in capitalization between the raw materials sector and the high-tech sector as one of the main priorities. He strives to ensure this, including through personal participation.
But another thing is no less important: although this superstructure is weakly susceptible to political play, if necessary, it is already quite capable of directly influencing politics. As long as politics does not bring pain to this area, it does not touch politics and politicians, setting a certain framework for the work of political administrators.
However, in the first half of 2023, the Soft group recorded the most significant loss for the Vision Fund ($32 billion), associated with a decrease in economic activity. What is characteristic is that this was not recorded even in the “Covid year”.
This required drastic moves to dump assets and shook the stock market. And who knows to what extent the position of “angry technologists” influenced the steps of political players in Europe, the Middle East and Southeast Asia.
It may well turn out that this factor is very poorly assessed by analysts who, out of inertia, still talk about the “petrodollar” and the unsustainable US national debt or about the irreconcilable struggle between Democrats and Conservatives. It may well turn out that the levers are located in a slightly different place.
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