From Oil to Influence: How the Gulf sovereign wealth funds are instruments of soft power

Ahmed Mahmoud Qutub

(Qatar Investment Authority owned ‘The Shard’, in London | (Via: Creative Commons)

Gulf sovereign wealth funds have transformed their passive financial pools of wealth into a dynamic instrument of global financial influence, merging economics with diplomacy. Through extensive investments in luxury real estate, sports, and industry, the funds project soft power while diversifying away from oil and gas dependency. However, beneath the facade of ambition and innovation lie complex rivalries, domestic challenges, and geopolitical uncertainties. 

Investment diplomacy is often characterized by countries seeking to attract foreign investment by offering incentives, primarily diplomatic avenues. However, the inverse also exists, as countries invest abroad through sovereign wealth funds, state-owned enterprises, and state-backed companies. Countries have begun looking abroad via outbound investments to strengthen their resources, alliances, and, most importantly, venture soft power. From an economic perspective, the strategies extend far beyond basic incentives and aim to achieve goals that go beyond simple factors motivating individuals. In essence, the investments aim at economic diversification, soft power, and regional partnerships. 

Sovereign Wealth Funds (SWFs) have historically served as vehicles through which nations can generate structured financial returns by investing their domestic capital surplus into international markets. Of the ten largest and most active funds, five are located in the Gulf region. In 2023, Gulf SWFs invested $82 billion USD, and in the first three quarters of 2024, an additional $55 billion USD was invested. This accounts for over half of all additional SWF activity in the time period. A further pivot was towards Asia, and more specifically China, where Gulf SWFs invested $9.5 billion USD as of September 2024. 

Globally, the SWF landscape has experienced significant growth with new high-profile acquisitions and total assets under management reaching $12 trillion USD, of which 40% is controlled by Gulf funds. This raises the question of what other driving motivators may be, beyond pure financial diversification and returns. 

The merging of finance with foreign policy is a key factor driving the multi-billion-dollar investments in foreign markets. The Gulf state of Qatar, known for its hosting of the 2022 FIFA World Cup and a SWF worth over half a trillion dollars, has reshaped its identity through luxury, real estate, and most notably, sports. The stated goal of Qatar’s SWF, the Qatar Investment Authority (QIA), is to “diversify the country’s economy away from natural gas and oil”, the source of all its wealth. QIA is unlike the other SWFs as it focuses almost exclusively on soft power, in some form or another. 

Investments in The Shard (London), Empire State Realty Trust (New York City), Paris, and Washington, D.C., are not only stores of wealth but also offer leverage in the geoeconomic world. Qatar has made strategic investments in major financial and cultural capitals around the world, not by chance, but as a means to secure influence. 

Sports remain one of the cornerstones of international relations, diplomacy, and influence. Qatar purchased Paris Saint-Germain in 2011 and, since then, has transformed the club from a modest football club into one of the global powerhouses, winning numerous trophies and, most recently, being crowned European champions. Sentiment from fans was not ideal; however, the association with Gulf “Arab” money has now become synonymous with victory and championships. In 2021, the Saudi Public Investment Fund (PIF) acquired Newcastle United, and supporters were beyond overjoyed with the prospect of becoming among the top clubs in the world, led by seemingly unlimited funds. However, allegations of sportwashing and controversy continue to plague the investments by Gulf nations.

Sportwashing, put simply, is a method of improving a government’s reputation through hosting major sporting events to attract positive media coverage and push away from controversy and, oftentimes, abuses. The major debt plaguing European football has allowed it to become a “well-paid puppet” for Gulf propaganda, thereby strengthening the perception of these nations on the world stage. 

Rivalries among Gulf nations have shifted, and further geopolitical tension can be sparked by the strong global financial influence of competing nations. Currently, the rivalry between Saudi Arabia and the United Arab Emirates has shaped Gulf politics as both seek to become the economic powerhouse of the region. The rivalry is shaped by the intense competition between two of the largest economies amid the rapid pursuit of strategic goals, such as Saudi Arabia’s Vision 2030. Failure to adopt unified stances on numerous regional issues has exacerbated the rivalry and potential rift.

The Gulf is among the most complex regions in the world from both a geopolitical and economic standpoint. As the nations seek to expand their global influence with their SWFs, they fail to take into account the nature of their prospects. Ambitious projects, sudden deadlines, human rights allegations, and contentious diplomatic rifts are all at odds with one another. From an economic and financial perspective, global investments are welcomed and often encouraged, particularly by Western institutions. However, these investments carry with them a sort of promise of continued ignorance to the multitude of problems deeply ingrained within the ultra-wealthy nations of the Gulf.