$1 Trillion 'NEOM City' Effort by Bin Salman Focuses on Asia... US Relations Restoration is Key

Initial Required Funds of 420 Trillion Won...Urgent Need for Financing
Focus on Possible Informal Meeting Between Biden and G20
Following Korea, Japan, and Thailand, Visits to India and Pakistan Scheduled for Next Month

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Hyun-woo] Ahead of the visit of Saudi Arabia's influential Crown Prince Mohammed bin Salman to South Korea, domestic companies in construction, energy, and ventures are increasingly hopeful about the influx of 'oil money.' Leading the way is the large-scale national project 'Neom City,' which Saudi Arabia is promoting, with expectations that domestic and international construction and manufacturing companies will sign various investment agreements with Saudi Arabia. Saudi state-owned oil company Aramco is also expected to announce an investment worth approximately 8 trillion won through its subsidiary S-Oil.

Meanwhile, Crown Prince bin Salman is known to plan an active investment recruitment campaign by consecutively visiting South Korea, Japan, Thailand, and other countries, starting with attending the Group of Twenty (G20) summit. This is to cover the construction costs of Neom City, which require over 1 trillion dollars.

As the recent deterioration and potential normalization of relations with the United States emerge as key variables determining the success of fundraising, attention is focused on whether the leaders of the two countries will hold informal talks around the G20 summit to seek improved relations.

◇Saudi Power Broker Focuses on Asia, Its Largest Oil Customer

[Image source=Reuters Yonhap News]

Crown Prince bin Salman, who first visited Bali, Indonesia, where the G20 meeting is held, plans to visit South Korea on the 17th, followed by Japan, and then Thailand, where the Asia-Pacific Economic Cooperation (APEC) summit will take place, embarking on a hectic Asian tour. Meetings and investment contracts with heads of major construction and manufacturing companies in Asia, including South Korea and Japan, are expected to follow.

Bin Salman's Asian tour is analyzed not only as an effort to attract oil money investments such as the Neom City project but also as a move to strengthen diplomatic relations with Asian countries, which have become the largest oil export markets.

According to The New York Times (NYT), bin Salman initially announced plans to visit India and Pakistan after visiting South Korea, Japan, and Thailand during this Asian tour, but due to scheduling issues, visits to these two countries have been postponed until next month. He also plans to visit Australia and New Zealand within the year, covering all major Asian countries.

Market analysis firm S&P Global stated in a report that "With the United States and the European Union (EU) expected to implement a price cap on Russian oil starting next month, Middle Eastern countries including Saudi Arabia are concerned about weakening market dominance," adding, "Unlike the U.S., which accounts for only 5% of Saudi exports, or Europe at about 10%, Asian countries account for over 65%. Therefore, if Asian countries join the oil price cap, the impact could be significant."

Some analysts suggest that the consecutive visits to U.S. allies in Asia could be a signal of pressure on the United States. The Washington Post (WP) analyzed, "Bin Salman, who announced plans to meet Chinese President Xi Jinping next month, visiting U.S. allies in Asia one after another could be a significant pressure on the U.S. government," and described it as "an indirect move to request normalization of relations with the U.S., with whom relations have soured due to oil price disputes."

◇Neom City, Large-Scale Funding Is Key...Will There Be Reconciliation with Biden?

For the mega construction project Neom City to get underway, massive fundraising is known to be the top priority. With initial investment estimated to exceed 420 trillion won, there are calls for improving relations with the United States to ensure smooth financing.

According to Bloomberg News, the Saudi government has estimated the initial funds required for Neom City at 320 billion dollars (approximately 424 trillion won). Half of this, 160 billion dollars, will come from the Public Investment Fund (PIF), while the other half is expected to be raised by listing the Neom City project on the stock market to attract external investors.

However, restoring relations with the United States is essential for smooth fundraising. Following the large-scale production cuts announced last month by OPEC+ (the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC allies), diplomatic friction between the U.S. and Saudi Arabia intensified, with the U.S. government urging its companies not to expand investments in Saudi Arabia. CNN quoted a U.S. government official saying, "The Biden administration is blocking the expansion of U.S. companies' investments in Saudi Arabia for national security reasons."

Saudi Arabia also emphasizes strong relations with the U.S. Adel Al-Jubeir, Saudi Minister of State for Foreign Affairs, said in an interview with Bloomberg News the day before, "Our relationship with the United States is very strong, and the two countries have gone through many storms in the past, developing a deeper and broader relationship," adding, "Although there are differences in opinions on the oil market, our relationship can overcome these sufficiently."

Attention is also focused on whether informal contact will occur between President Biden and Crown Prince bin Salman around the G20 summit. Politico, a U.S. political news outlet, pointed out, "President Biden has officially stated that he does not plan to hold talks with Crown Prince bin Salman at this G20, but contact is necessary," adding, "Many leaders want to meet bin Salman at this G20 summit, including those from Europe facing an energy crisis and President Xi, who is scheduled to visit Saudi Arabia next month."

◇Saudi PIF, a Major Player in Global Investment, Also Focused on Overseas Asset Sales

[Image source=Reuters Yonhap News]

As the Saudi government begins selling various assets to raise funds, attention is also focused on the future moves of the Public Investment Fund (PIF), known as a major player in the international investment industry.

According to The Wall Street Journal (WSJ), PIF announced yesterday that it sold a 10% stake in the Saudi Tadawul Group, which it previously held, for 600 million dollars. Tadawul Group operates the Saudi stock exchange, and PIF held 70% of the total shares before the sale, which reduced its stake to 60%. The funds raised are expected to be used for the Neom City project.

Consequently, there is speculation that PIF may sell off a large portion of its overseas assets in the future. As of last year, PIF held assets totaling 526.8 billion dollars, including overseas investments such as SoftBank (45 billion dollars), Blackstone (20 billion dollars), and Uber (3.5 billion dollars).

◇S-Oil under Aramco to Make Large-Scale Investment

[Image source=Reuters Yonhap News]

Meanwhile, according to the refining industry, S-Oil is expected to hold a board meeting on the 17th to approve the final investment decision (FID) for the 'Shaheen Project,' an investment project worth 8 trillion won. This project involves establishing chemical production facilities for ethylene and polyethylene at the Ulsan S-Oil plant, with construction starting next year and completion scheduled for 2026.

This investment is being promoted by Aramco, the major shareholder of S-Oil, timed with Crown Prince bin Salman's visit to South Korea, and is known as the largest investment project in S-Oil's history. Aramco, a state-owned company operated by the Saudi royal family and the Public Investment Fund (PIF), acquired S-Oil from Ssangyong Group in 1999 and holds a 63.4% stake as the largest shareholder.

Expectations are also rising for winning orders related to the Neom City construction plan. The Neom City project, with a total budget of 500 billion dollars (approximately 663 trillion won), is expected to lead to a series of large-scale infrastructure construction contracts, including office buildings, housing, ports, and railways. Previously, Samsung C&T and Hyundai Engineering & Construction won the tunnel construction contract for Neom City as a consortium, and as construction accelerates from the end of the year, related construction orders are expected to increase further.

This content was produced with the assistance of AI translation services.