Friday, 09 June 2023 21:56

How big of a win for MBS is the Saudi-PGA golf deal, actually?

Former President Donald Trump and Yasir Al-Rumayyan, governor of the Public Investment Fund (PIF), the sovereign wealth fund of the Kingdom of Saudi Arabia, at the first tee prior to the start of the second round of LIV golf invitational series on July 30, 2022, in Bedminster, New Jersey.

The golf course is perhaps not the arena that immediately comes to mind when you’re thinking about geopolitics. But with one proposed golf business deal, Saudi Crown Prince Mohammed bin Salman, known as MBS, just hit the geopolitical equivalent of a hole-in-one.

The surprise announcement this week that Saudi-backed LIV Golf would merge with the preeminent American PGA Tour under a new parent company means MBS has gained a powerful hand over American and international golf.

LIV Golf is a newish enterprise launched by the Saudi sovereign wealth fund, which is essentially the half-trillion-dollar piggy bank of the crown prince. Since launching in 2022, the tour used its massive budget to attract top talent away from the PGA Tour, even as human rights advocates, activists, and some players emphasized LIV’s connections to MBS and his brutal reign. LIV golfers sued the PGA Tour on the grounds that it is allegedly engaging in monopolistic behavior by barring its players from participating in LIV.

Many golfers were against the Saudi-backed entry into the sport. Tiger Woods declined some $700 million to join LIV. But others, with a dose of reluctance, took part. Golfer Phil Mickelson nabbed $200 million to participate in LIV, though even he conceded, “We know they killed [journalist Jamal] Khashoggi and have a horrible record on human rights.” Other big players jumped on board too, but not without controversy and some anger. As recently as last month, onlookers in New York booed LIV golfers.

Then, on June 6, the PGA Tour announced that it was banding together with LIV and a Dubai-based European tour to establish a “new, collectively owned, for-profit entity.” Players took to Twitter to express their surprise at the deal, and even staffers at the PGA Tour were blindsided. Right now, the deal is just a “framework”; it will need to be finalized and approved by the PGA Tour’s policy board, and could face regulatory scrutiny.

But it’s already a dramatic development that could reshape the sport’s international landscape. Even more than that, it’s another sign of Saudi Arabia’s persistent and far-reaching strategy — across industries from Silicon Valley to Hollywood — to grow global influence. MBS is generating more and more wins.

“This is much, much bigger than golf,” says Khalid Al-Jabri, a Saudi entrepreneur and physician based in Washington, DC.

Details on the deal are still thin, and the memorandum between Saudi’s Public Investment Fund (PIF) and the leagues is not public. Al-Jabri disputes whether this is best described as a merger. He calls it a “sadistic takeover” and emphasizes that this is going to be the model for how MBS will continue to make inroads in American affairs, whether through Big Tech or video gaming or sports, and sanitize the reputation of Saudi Arabia in the process.

“If you can’t join them, bully them until they allow you to come in,” Al-Jabri told me. “This is not about golf. This is about influence. And MBS got what he wanted.”

The Saudi play for American golf

If you want to buy influence, buy golf. That’s in essence what the blue-chip consulting firm McKinsey told the Saudi sovereign wealth fund when it provided it with a blueprint for “a high-risk high-reward endeavor” in 2021.

It was codenamed Project Wedge, and sought to boost Saudi Arabia’s global reputation, particularly after the 2018 killing of Khashoggi, MBS’s war in Yemen, and the blackmailing of Saudi royals at the Ritz Carlton in Riyadh. The idea recalls the sportwashing of undemocratic regimes, as has been seen with the Olympics in Beijing or the World Cup in Qatar.

Later that year, LIV Golf launched with billions of dollars of Saudi backing. Money was hard to ignore. “LIV, financed by Saudi Arabia’s Public Investment Fund, distributed $255 million in prize money in 2022, including $30 million in bonuses. In all, 52 golfers earned more than $1 million,” according to Golfweek.

It caused a major rift within the sport. The PGA Tour’s European partner, the DP World Tour, suspended and fined golfers who went over to LIV. In the US, LIV sued the PGA Tour for choking competition. The litigation has been costly and dramatic, and the PGA Tour lacks the cash reserves of the Saudi sovereign wealth fund. The PIF also hired the powerhouse global consultancy Teneo, “to disrupt professional golf and compete with the Tour via LIV,” according to the PGA Tour’s motion.

The US Justice Department is investigating the PGA Tour on possible antitrust violations, as news reports indicated last summer.

Throughout, golfers expressed outrage about the meaning of Saudi Arabia moving onto the course, but those who signed up for LIV suddenly became rather reserved. “These golfers are very opinionated. They’ve always been opinionated. They’ve been shy about sharing their opinions. Now, if you look at the people who have signed deals with LIV, all of a sudden, they have no opinions whatsoever,” a PGA Tour representative, speaking on the condition of anonymity, told me earlier this year. “They’re prohibited from disparaging any investor, which in this case actually means the Kingdom of Saudi Arabia.”

The PGA Tour spent the last year and a half focused on incompatibilities between the two tours, with an emphasis that LIV is not serious golf. Yet the announcement of what appears to be a merger this week has given MBS a seat at the table.

“There was a price at which PGA Tour was willing to sell itself to Saudi Arabia,” says Sarah Leah Whitson, executive director of Democracy for the Arab World Now, the group founded by the slain journalist Jamal Khashoggi.

The Saudi Public Investment Fund will provide “a capital investment into the new entity to facilitate its growth and success,” according to a press release, and that could mean billions. “This new entity (name TBD) will also include the PGA TOUR’s commercial businesses and rights, as well as those of the DP World Tour,” the statement continues. The lawsuits between the two will reportedly stop, but generally the details remain murky.

Each tour would reportedly still be responsible for running its own operations.

MBS, it might be said, is smart to focus on sportswashing. “The only question is whether the American people and their elected officials want to be influenced and controlled by a murderous dictator,” Whitson told me.

This is much bigger than golf. This is about influence.

After the assassination and disappearance of Washington Post columnist Khashoggi in 2018, MBS became a liability. On the campaign trail, candidate Joe Biden pledged to make him a “pariah.”

But now, the Biden administration has warmed to Saudi Arabia, and Secretary of State Antony Blinken was even visiting MBS in the Saudi capital this week in a sign of where things stand. In a statement, the secretary “emphasized that our bilateral relationship is strengthened by progress on human rights,” suggesting that the two countries had turned a corner.

MBS has slowly and steadily been welcomed back to the business world, too. That has been due in large part to his financial largesse and how the Public Investment Fund has funneled billions of dollars into Silicon Valley. Those investments are now openly celebrated by tech leaders (though when I reached out to dozens of American investment funds and startups, none of them wanted to talk about it).

PIF’s venture arm, Sanabil, is putting $2 billion a year into products we consume and tech we benefit from. It has direct investments in Bird scooters and AI startups Vectra and Atomwise. Plus, there’s indirect money going through other venture funds into companies including Credit Karma, GitLab, Reddit, and Postmates, as well as the popular running shoe brand On or the military-tech darling and Pentagon contractor Anduril.

Among the previously undisclosed firms that had received Saudi funds: Andreessen Horowitz, whose portfolio companies include Instacart and SpaceX.

And then there are the forays into WWE, horse racing, soccer, and Formula 1. There have been investments in Hollywood and film, in media, and in the arts.

Saudi dollars have become so ubiquitous that footballer Lionel Messi going to Miami over Saudi Arabia seemed to be a rare exception.

One thing to add is that former President Donald Trump, who owns a global network of golf courses, stands to benefit. He has hosted LIV events at his resorts, and the chairman of the Public Investment Fund was spotted golfing with him last year in a MAGA hat.

“We have to see Saudi Arabia’s investment in golf as a very deliberate strategy to expand their influence and control over America’s political, economic, and cultural institutions,” Whitson told me. “Money won this round.”