The destabilization in the Persian Gulf puts millions of dollars of investment in the state at risk.

MadridIn Spain, the destabilization of the Persian Gulf countries does not go unnoticed by the economic and business world, which in recent years has witnessed the slow but steady growth of trade ties with the region's Arab monarchies. The US and Israeli attack on Iran not only "looks likely to last quite some time," in the words of Foreign Minister José Manuel Albares, but could also have unforeseen "repercussions." And it is these repercussions that are already affecting this region of the Middle East, which includes Saudi Arabia, the United Arab Emirates—the two largest economies in the region—Qatar, Kuwait, Oman, and Bahrain. All of them form the Gulf Cooperation Council. One of the keys behind this trade relationship is the influx of Arab sovereign wealth funds into Spain through investments in strategic sectors. But for large Spanish companies, these countries have also been seen as a window of opportunity to win bids, especially in infrastructure, and expand their business in areas such as tourism – particularly luxury tourism – at a time when the Persian Gulf is looking for ways to reduce its heavy economic dependence on oil and gasLet's take it step by step. First, it's important to note that the region has six of the fifteen largest sovereign wealth funds in the world, some of which have not hesitated to invest in Spanish businesses. Research by the Elcano Royal Institute revealed that in 2021, more than 86% of the investment from Gulf Cooperation Council countries in Spain was public.

Notable among these funds are Saudi Arabia's Public Investment Fund; the United Arab Emirates' Mubadala and Abu Dhabi Investment Authority; Qatar's Qatar Investment Authority (QIA); Oman's Oman Investment Authority; and Kuwait's sovereign wealth fund (Kuwait Investment Authority or KIA). Some of these funds hold significant stakes in companies such as Iberdrola, Telefónica, IAG, Colonial, Enagás, Cellnex, El Corte Inglés, and Moeve (formerly Cepsa). In fact, in the case of Iberdrola, Qatar's sovereign wealth fund is the largest shareholder with 7% of the share capital. According to Bloomberg, the presence of Arab capital in Spanish listed companies alone would reach almost 12 billion euros.

But they have also forged business alliances, particularly in the energy sector. For example, KIA owns a significant stake in Naturgy's international renewable energy production subsidiary, while Endesa recently closed a €184 million deal with Masdar, which is controlled by the fund.Mubadala, for example, invested in a solar park. They also invested in key sectors such as real estate, utilities, the plastics industry, and renewable energy, among others.

It is true that these are funds that plan long-term investments, primarily because they seek profitable and stable income streams abroad to replace those generated by hydrocarbon exploitation. Furthermore, higher oil and gas prices automatically provide them with more revenue. However, this reasoning assumes there is no risk of destabilization in the region that could jeopardize the internal security or economies of the various Arab monarchies—a situation that raises the specter of an abrupt withdrawal of investments.

At the same time, beyond the corporate implications of this commercial relationship—that is, the weight of these funds within the share capital of Spanish companies—in the case of the energy sector, the relationship is particular regarding the trade of oil and gas from the region, especially as efforts are made to reduce dependence on crude oil and gas.

It is true that these countries represent a small part of the total fuel (oil and gas) that reaches the State—it stands out for the diversification of supply sources—so the Spanish government has been quick to send a message of reassurance regarding pressure on prices, but the situation is indeed concerning. Last November, for example, Naturgy signed a memorandum with the Omani state-owned liquefied natural gas (LNG) company to explore a ten-year LNG supply contract. Likewise, the blockade of the Strait of Hormuz, through which 5% of the crude oil that arrives in Spain passes (2% in the case of gas), is a problem for companies like Repsol.

Spanish investments in golf

But the uncertainty and the situation in the countries are also hindering Spanish investment in the region. As the ARA explained, one thing that puts Spain in a privileged position when it comes to accessing public contracts or growing its business in the area is that the Gulf monarchies see the Spanish royal family as "a point of similarity." This is also due to the role of tourism and football, where these countries have found another investment opportunity. "We are continuously monitoring the situation to anticipate any negative effects and react if necessary," stated Economy Minister Carlos Cuerpo on Monday.