Why Saudi Arabia might not fulfil spending pledge to US amid China-America rivalry

Saudi Arabia has pledged to boost investments in America to nearly US$1 trillion, but according to analysts Riyadh could struggle to meet that target. Rather, they said the pledge – announced when Crown Prince Mohammed bin Salman visited Washington last month – was more about the “political display” than a binding commitment. It was an increase to the US$600 billion that was promised in May, when US President Donald Trump visited Riyadh. The latest pledge comes as the rivalry intensifies between the US and China, including a battle for influence in the oil-rich kingdom of Saudi Arabia. By comparison, China and Saudi Arabia signed commercial deals worth about US$30 billion when Chinese President Xi Jinping visited Riyadh in 2022. New business deals signed between Riyadh and Washington in November cover US infrastructure, technology and industry and include a civil nuclear cooperation agreement and a memorandum of understanding on artificial intelligence. While the White House said the deals deepened trust between the two countries, analysts have questioned their feasibility. Niu Xinchun, director of the Institute of Middle East Studies at the China Institutes of Contemporary International Relations, said how much Riyadh could realistically invest in America was “a question that is hard to answer”. Writing in World Affairs, a magazine associated with the Chinese foreign ministry, Niu pointed out that global oil prices remained low amid a supply glut, and that Riyadh had increased spending on development projects. “With international oil prices remaining depressed and the country’s domestic spending expanding too aggressively, Saudi Arabia is struggling to balance its revenues and expenditures,” Niu said. He noted that Riyadh had made deals and commitments with the US worth US$450 billion during Trump’s visit in 2017, but they had not been fully realised. He said if US exports to Saudi Arabia grew at an annual average of 10 per cent it would still leave a large shortfall, and that could only be filled by investments. Oil prices are forecast to remain sluggish in coming years, and Riyadh earlier this month projected a deficit of 165 billion riyals (US$44 billion) in 2026. That would be about 3.3 per cent of the country’s gross domestic product. An International Monetary Fund report released last week also indicated that the next year would be “pivotal” to the kingdom as it moved into “a more challenging environment characterised by lower oil prices and rising financing needs”. According to Niu, that would mean Saudi Arabia’s overseas investments “would have no new sources of funding”. “Any increase in external investment would therefore have to be financed through borrowing or sale of existing assets,” Niu wrote. John Calabrese, a US foreign policy expert at American University and the Middle East Institute in Washington, noted that Riyadh’s commitment to Vision 2030 – a programme to diversify the economy beyond oil – would take up most of the kingdom’s investment capacity. The country’s sovereign wealth fund – the Public Investment Fund – currently manages around US$1 trillion. Owned by the royal family, the PIF is a major source of Riyadh’s overseas investments. But the fund’s domestic spending on Vision 2030 development projects had already hit more than 70 per cent of the PIF’s total funds, its governor said earlier this year. “Vision 2030 spending demands remain immense, even as some marquee projects – most notably Neom – have been delayed or scaled back,” Calabrese said, referring to the flagship US$500 billion linear megacity project in the desert that has been delayed. Soon after Riyadh made the US$1 trillion pledge to invest in the US, The New York Times reported, citing sources familiar with the matter, that the Saudi fund was facing financial challenges and had multiple failing projects. Analysts have also said the pledge was more about optics. “Saudi Arabia’s US$1 trillion commitment to the United States is best understood as a political display, not a binding obligation,” according to Jesse Marks, executive director of Rihla Research & Advisory, a Washington-based consultancy focused on the Middle East. “This flexibility is what makes it [able to be] nominally achieved despite the kingdom’s ongoing significant fiscal constraints,” he said. “[It means] execution at US$1 trillion scale depends entirely on how ‘investment’ is defined, how much leverage is deployed, and over what time frame, rather than pure sovereign capacity to write cheques.” Yahia Zoubir, a non-resident senior fellow at the Middle East Council on Global Affairs in Doha, said there could be multiple sources of investment – from state funds like the PIF to borrowed money, Saudi’s foreign investors, and private and institutional capital. He said Riyadh was engaging in chequebook diplomacy but also using this “capital mobilisation” to benefit its own initiatives like Vision 2030. “Saudi Arabia wants to use its own money like a magnet to pull in a much larger amount of outside investment,” Zoubir said. China could also be a factor in the investment pledge, according to Calabrese. Strategic sectors – such as weapons and artificial intelligence – will be central to the Saudi-US deals and they are also areas where the China-US rivalry is playing out. Salman also vowed to deepen ties in hi-tech areas like AI when China’s top diplomat, Wang Yi, visited Riyadh earlier this month.

Why Saudi Arabia might not fulfil spending pledge to US amid China-America rivalry

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Analysts say Riyadh’s investment target of nearly US$1 trillion may not be feasible – and it’s more about optics than a binding commitment

Analysts say Riyadh’s investment target of nearly US$1 trillion may not be feasible – and it’s more about optics than a binding commitment