The rift between Saudi Arabia and the United Arab Emirates is spilling over from geopolitics into global finance, forcing banks to make difficult choices as money, people and assets may no longer flow as freely across the region. According to reports from Business Standard, this development, combined with the impacts of the Iran war, has upended traditional notions of how the Gulf operates. The finance industry had long treated the Gulf as a single, large and obliging market, but the reality shows it was never that simple.
By 2023, both Saudi Arabia's Public Investment Fund and Abu Dhabi's Mubadala Investment Co., as well as Qatar Investment Authority, had moved away from open-ended passive commitments to trophy assets. As reported by Business Standard, these investors are now seeking investments that meet very specific national needs. The Saudis are prioritizing deals that offer opportunities to diversify their local economy away from fossil fuels while creating jobs for their working-age population, while capital from the UAE is looking for global platforms that will make the Emirates indispensable to the world economy after oil depletion.
According to the analysis, Gulf investors now evaluate deals based on their specific national objectives. Saudi investors examine deals for their ability to build domestic capability, Emirati investors consider supply-chain leverage, while Qataris test deals for their ability to withstand geopolitical and economic shocks over the long term. As reported by Business Standard, this means that even data-center deals have differing appeal depending on the investor's national priorities and strategic objectives.
Within each Gulf nation are numerous other pools of capital, some controlled by private individuals with familial or state links and overlapping but not identical agendas. According to Business Standard, David Petraeus of KKR & Co. noted that investors all have slightly different personalities, making aggregation difficult. The existing centers of finance saw the region's hunger for economic transformation as an excuse to finance their own operations, but they will now need to work harder with fewer flying visits and more boots on the ground.
