With the massive energy surplus financing at its disposal, Gulf Cooperation Council countries will continue to shape the future of football. This will likely result in more acquisitions of football assets particularly in the highly indebted and underperforming football market sin Italy, France, and Spain.
Geopolitical tension caused by the Russian invasion of Ukraine will continue to affect energy markets in 2023. Oil and gas prices will stay high transferring global wealth from consumers to energy exporting countries. Global Oil and natural gas companies such as Saudi Aramco, Qatar Energy, and Abu Dhabi National Oil Company have experienced record revenues since Russia invaded Ukraine in February 2022. These state-owned companies will continue to outperform the market and bring in stellar revenues as new supply is constrained by bottlenecks and regulatory changes. The biggest winners of the crisis are the Gulf oil and gas producers’, which control 38 percent of global oil reserves and 24 percent of natural gas reserves. According to the IMF, in 2022 alone Middle East and Central Asia energy producers have generated $320 billion more in revenue due to the geopolitical crisis. The cumulative surplus is expected to reach $1,4 trillion over the next five years.
Saudi, Qatar, and UAE Will Change Football Global Landscape
The 6 GCC countries, including Saudi Arabia, Qatar, Kuwait, UAE, Oman, and Bahrain are going to be among the fastest growing economies in the world in 2022 with an expected average of 6,5%. Saudi Arabia, the largest GCC country, will grow at 8% in 2022, and next year, real GDP growth is expected to be a solid 5%. GCC countries have combined assets of $3,2 trillion amounting to 40% of SWFs global assets.
It is well known that since the 2008 financial crisis, Gulf countries changed investment strategy and started using their SWF to diversity their investment portfolio and start taking large equity positions in large companies across all sports segments, including football, golfing, sky, formula one, and other sports undervalued assets. This shift in strategies is motivated by their priority to diversify away from hydrocarbons, and made possible by their increased investment readiness, local teams’ strength, and increased political clout.
Qatar: Gulf football leadership and financial capabilities are clearly displayed in Qatar's successful hosting of the 2022 FIFA World Cup. Qatar invested $ 220 billion to prepare for the World Cup. This is 20 times the investment done by Russia and Brazil who spent $ 14, and 15 billion respectively to host the previous 2 world cups. Qatar is creating an important precedent in football finance, bringing in over $20 billions in revenues (Russia brought in only $5.2 billion in 2018) taking advantage of December, the most lucrative TV advertising period of the year.
Saudi Arabia: The Kingdom propelled by its powerful Crown Prince Mohammed bin Salman (MBS), is “weaponizing” state financing to ensure that Saudi Arabia wins the bid to host the FIFA World Cup in 2030. To get there, MBS will deploy oil diplomacy, savvy investment, and football activism to ensure that its partners and new friends vote for Saudi instead for Spain, Portugal and Ukraine who are bidding jointly for the 2030 FiFA World Cup. There will also be more football teams investments, which could also target lower leagues across the Mediterranean countries.
UAE: Finally, the Emirate state of Abu-Dhabi, the largest football investor in the world, will continue to expand its football teams acquisitions to Brazil and to Europe. This will potentially add new club assets to the 12 football clubs they already own across Italian, Spanish, English (among others), and position the Emirate as the leading football“market maker” of the world.
Global Football Is In Financial Trouble
Covid-19 and the ongoing recession have increased the financial vulnerability of football teams, particularly in Europe, as they struggle to finance their expensive operations and fail to create more stable and innovative revenue streams. These include monetizing fans engagement, stadium naming rights, international sponsorship, and sport tourism just to name a few. The financial weakness is particularly strong in Southern Europe, where football teams are either the extensions of family businesses or have decrepit management and financial models. These financial troubles lower their book value and make these assets attractive to foreign investors, particularly the cash rich Gulf countries seeking to build football at home, while monetizing bankable football projects. For countries like Saudi Arabia, Qatar and UAE, target acquisitions like Inter Milan, Naples, Marseille, is a way to leverage other businesses in these cities. Particularly across fashion, logistics, ports, air-travel, and tourism.
While rumors about billion-dollar football team acquisitions will abound, there is no doubt that Gulf Sovereign Wealth Funds will “flex their muscle” in 2023 and use their combined financial war chest of $ 1,449 trillion to invest in football and other sports in Europe. Qatar will consolidate its global role as the international and western focused sport partner bringing the World Cup to a successful close. Saudi Arabia will become a more prominent football investor doing whatever it takes to bring the World Cup to the Kingdom in 2030 while investing in undervalued football assets. Abu-Dhabi, via the City Football Group (CFG) investment fund, will establish itself as a powerful global football management brand, prioritizing investment in e-sports and the future of women football.
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.