April 24, 2024

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The Middle East’s Economic Aspirations at Odds with Escalating Geopolitical Tensions

During Saudi Arabia’s flagship investment conference in October 2018, Crown Prince Mohammed bin Salman (commonly known as MBS) spoke confidently about a new era for the Middle East, declaring that “the new Europe is the Middle East.” He envisaged a forthcoming renaissance in the region over the next 30 years. Fast forward five years, and the world’s top executives are once again gathering in Riyadh for the Future Investment Initiative, a conference often likened to ‘Davos in the Desert.’

However, today’s comparisons with Europe are not the bright prospects that MBS had hoped for. While Europe contends with the fallout from Russia’s invasion of Ukraine, the conflict between Israel and Hamas is resurfacing long-standing political tensions in the Middle East, diverting attention from the prince’s vision of economic development.

The Future Investment Initiative was initially launched in 2017 as a key component of Saudi Arabia’s broader effort to rebrand the Middle East, with the kingdom at its core. MBS aimed to open the country to more foreign investment and tourism while flexing soft power through initiatives involving the powerful sovereign wealth fund under his leadership.

In the process, MBS resolved conflicts with Qatar and Turkey, sought a resolution to the Yemen war, and even normalised relations with arch-rival Iran in March, thanks to the mediation of Chinese President Xi Jinping.

While the Israel-Hamas conflict continues to escalate, the organisers are determined to proceed with the conference. Richard Attias, CEO of the FII Institute, stated that there have been only 10–20 cancellations out of over 6,000 attendees, primarily due to corporate travel policies and insurance costs.

Leading figures in global finance are expected to attend, including BlackRock Inc.’s Larry Fink, Bridgewater Associates’ Ray Dalio, JPMorgan’s Jamie Dimon, Citigroup’s Jane Fraser, and top executives from companies like TotalEnergies, Petrobras, and FIFA’s Gianni Infantino.

The potential impact of the Israel-Hamas conflict on investment flows and tourism in Saudi Arabia remains uncertain. Still, the risk of a broader regional conflict could cast a shadow on Prince Mohammed’s ambitions. Experts anticipate investors will exercise caution in the short term, even though the kingdom is actively working to prevent escalation and pursue its long-term vision for a new Middle East.