Anna Balletbò
Journalist and President of the Olof Palme International Foundation
In the middle of the period of setting up a new government after the last general elections held on 23 July 2023, the news of the entry of the Saudi Telecom Company (STC) fund into the Spanish company Telefónica, acquiring 9.9% of its shares, has come as a surprise.
I say surprised because a transaction of this size, 2.1 billion euros, in a strategic European company has been done so quietly and slowly so as not to raise the alarm, that the Executive Chairman of the company himself, José María Álvarez-Pallete, confessed that he had not found out until the day before the news was published. And that is precisely what is most surprising. For years now, the Gulf countries have been calculating not only the volume of their oil reserves, but also the time frame in which demand will be drastically reduced due to the effects of climate change and the rise of alternative energies. At the same time, they are studying new investments to place their profits in strategic sectors that could become as desirable and profitable as oil and its derivatives have been in the last 50 years and especially in the last 10 years.
To give an idea, in 2016, 20 % of global oil demand was accounted for by cars: 19 million barrels per day to move 900 million cars. In 2021, global oil demand in road transport will reach approximately 43.7 million barrels per day.
According to forecasts by Claudio Estrada Gasca, director of the Centre for Energy Research at the National Autonomous University of Mexico (UNAM), there are only 42 years to go before the planet’s crude oil reserves run out, 65 years before natural gas reserves run out, and 150 years before coal reserves run out. Should we be surprised by the strategic moves of those countries focused on a powerful but unique industrial activity based on the exploitation and export of energy, oil and gas? It does not seem so; rather, what is surprising is that they have taken so long to take notice and have only been concerned with regulating the markets to stabilise prices via OPEC without having to act as rambunctious exporters.
China has been busy pushing for and controlling a new silk route by sea, acquiring control of more than 100 ports around the world in over 60 countries to ensure expansion of its global market by controlling the movement of containers. China’s state-owned Cosco acquired 51% of the port of Piraeus (Greece), under a deal that would allow it to obtain up to 67% five years later. The same company is in talks to acquire a stake in the port of Hamburg, Germany; if completed, it would be Cosco’s eighth port investment in Europe. Meanwhile, Shanghai International Port Group has just taken control of the Israeli port of Haifa. All this as part of port expansion in the context of the Maritime Silk Road.
This initiative is part of a wider plan for Chinese capital to invest in infrastructure around the world.To achieve this goal, analysts say it is essential to have control of port concessions in geostrategic locations. And they seem to be succeeding. Chinese-invested container ports have experienced an above-average increase in shipping connectivity, says Jan Hoffmann, head of the Trade Logistics Unit at the United Nations Conference on Trade and Development (UNCTAD).
From a historical point of view, Sam Beatson, Professor in the Department of Finance, Risk and Banking and in MBA programmes at the University of Nottingham Business School (NUBS), UK, argues that, in this Chinese effort, “there is no desire to do so in a threatening way. The key element driving the port strategy of Chinese companies is greater control and efficiency in their global maritime business, and the pursuit of opportunities to participate in nearby development projects”.
Other researchers, such as James R. Holmes, Professor of Maritime Strategy at the US Naval War College, take a more confrontational view: “The goal is to create a self-sustaining cycle between trade, military power and diplomatic influence. Access to ports abroad allows China to develop trade networks and increase its wealth.
Arab energy, oil and gas producing countries have in recent years stepped up their purchases of Western-listed companies, taking advantage of the increased profits derived from hydrocarbon exploitation. Their objective is basically economic, as they seek to diversify their investments in order to generate additional income outside oil and gas, given the possibility that production and/or consumption of both will fall in the future.
Telefónica is not an isolated case. It is just the latest Western takeover by abundant Arab capital. The purchase of the 9.9% stake in the Spanish operator already in the hands of the Saudi telecommunications company STC Group for 2.1 billion euros, the maximum limit allowed by law for not requiring prior authorisation from the government, is perceived by many as something new and even threatening, but the truth is that at present, neither is the case.
Other acquisitions in Spain
Telefónica joins the list of Spanish companies with investments from the Middle East. The sovereign wealth fund Qatar Investment Authority (QIA) is the main shareholder of Iberdrola, with 8.7%; it also owns 19% of the shares of Colonial, Spain’s largest socimi by volume of assets; Qatar Airways has 25% of the airline group IAG, to which Iberia and Vueling belong; Mubadala Investment Company, the sovereign wealth fund of the United Arab Emirates, holds 63% of Cepsa; it also entered the capital of Enagás with a stake of over 3%, making it the fifth largest shareholder of the energy group.
For its part, the participation of Saudi capital in Spanish listed companies had not been significant until now, after its entry into Telefónica, but it has had a presence in various operations. Examples include the hosting of the Spanish Super Cup from 2020, the purchase of 17 Meliá Group hotels by the Saudi fund ADIA for 600 million euros, its stake in El Corte Inglés and the construction of a synthetic fuels plant in the Port of Bilbao by the oil company Aramco together with Repsol.
Looking for investment opportunities
The case of Spain is a drop in the ocean. These purchases are part of a much broader strategic plan of global investment to try to diversify the Gulf states’ revenues. Their governments, in the hands of royal dynasties, are using their sovereign wealth funds, fuelled by oil and gas revenues, to drive major projects domestically, but also investments of all kinds around the world, including in the US, Europe and Asia.
For me, the surprising thing is that in Europe in general and in Spain in particular, we have not chosen to organise the gathering of sensitive information on those companies we consider essential and/or strategic, not to fence off the markets, but to know in advance what is going on and above all that their CEOs should not have to find out about it from the media at the eleventh hour. Such information would help Ms Von der Leyen to better understand what is happening in the capital markets and Europe’s role on the world stage. Knowing the capital movements of two or three hundred European companies would be a good guide to avoid surprises. If we had some informants in the main markets where the main stock exchanges operate, we would have an interesting picture of flows by sector. We would be able to see the lizards coming with enough time to tickle them if that is strategically indispensable. Embassies can help a lot and they know how to do this.
Finally, although the Saudi company STC Group has become a majority shareholder in Telefónica, it is not formally in charge. The group led by Isidre Fainé holds a 5.9% stake in Telefónica through Criteria, 2.4%, and CaixaBank, 3.49%. For its part, BBVA has a shareholding position of close to 5%. They only need to have a coffee now and then to exercise control and if they need more, they can call some of us small depositors who have some Telefónica shares, which I am already making available to Isidre Faine if he needs them. You have to be patriotic with what was the leading Catalan bank at the time and is still the leading bank in Spain. Hard to believe!
© This article was originally published in La Hora Digital / All rights reserved.
© Este artículo fue publicado originalmente en La Hora Digital / Todos los derechos reservados
