The Gulf states’ sovereign-wealth funds, including the Abu Dhabi Investment Authority (ADIA) Qatar Investment Authority and Saudi Arabia’s Public Investment Fund (PIF) manage a combined $2tn, and are using their money to invest in infrastructure and #finance.

The Gulf’s four biggest members, #Kuwait, #Qatar, the #UAE, and #SaudiArabia, could still pocket a $300bn surplus in 2023, making a cumulative $650bn over the two years, even if oil prices remain at $85.

During previous oil booms, central banks in #GCC countries like Saudi Arabia recycled their petrodollars by #investing in safe and stable assets like Western banks and government bonds. However, this time around, with most GCC currencies pegged to the dollar, central bank reserves are not growing and interventions in foreign-currency markets have been rare.

According to the Economist, the money generated by high oil prices in the Middle East is being used to advance political goals at home and gain influence abroad, It is more adventurous and less Western-centric.

Gulf states have used their oil revenues in three different ways: to repay external debts, lend to allies, and acquire foreign assets. After the oil prices fell in 2014-2016, Gulf states borrowed heavily on Western capital markets to overcome the earnings shock. Now, some petrostates are using the higher prices to repay their debts, and some are lending money to countries such as Egypt and Turkey in exchange for stakes in their state-owned assets.

SWFs #funds are increasingly #investing in unconventional assets like stocks and alternative assets such as private equity, property, infrastructure, and #hedgefunds, which make up 23-37% of total assets for the three largest funds in the region. Direct investments are growing fast, with private-market deals and acquisitions of stakes in listed companies. Sovereign-wealth funds are also providing debt to finance large takeovers, including by buy-out groups. Recently, PIF disclosed that it acquired stakes in dozens of #privateequity firms.

SWFs in the Gulf are becoming more independent in managing investments, with a growing trend of retaining investment firms only for specific services and market intelligence. Funds are hiring a team of specialized professionals to advance the strategic goals of Gulf states, such as developing #renewableenergy food, #transport #pharma, and #technology .

The rise of specialist teams to survey #China, #India, and Southeast #Asia shows the Gulf funds’ new direction of investing, doubling down on China when others are pulling back. As Gulf states attempt to cut their reliance on oil, these SWFs are being leaned on to invest at home with funds bankrolling futuristic Saudi settlements, such as Neom, and other projects.
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https://www.economist.com/finance-and-economics/2023/04/09/welcome-to-a-new-era-of-petrodollar-power