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Middle Eastern governments have spent the last few years investing heavily in global sports, from soccer and boxing to the NBA and NHL. The war in Israel threatens to upend much of that momentum.
The rush to claim sides on the violence of the past two weeks has highlighted a stark ideological difference between many of those Gulf states and the very sports leagues, teams and companies that have courted capital from their sovereign wealth funds. And it will likely force both sides to reckon with differences that are often overlooked when these deals are struck.
The contrast has been glaring. One day after the Qatari government said Israel was “solely responsible” for the escalation of violence, the Washington Wizards put out a statement saying that the NBA team, whose owners recently took a passive investment from the Qatar Investment Authority (QIA), “stand(s) with the people of Israel.”
In the past week I’ve spoken with nearly a dozen sports bankers, lawyers and U.S.-based ownership groups about how the fallout of the Hamas terror attacks and the Israeli military’s response will impact sports deals. No one wanted to speak on the record, but almost everyone said some version of the same thing—many negotiations will be put on hold, sovereign wealth investments will get trickier and some deals will likely fall apart. Two people said they were aware of talks that had already been abandoned.
That would be an abrupt shift from the trend of the past few years. Global sports properties have embraced these new sources of capital just as many Middle Eastern governments seek global business opportunities that can diversify their economies beyond natural resources, and maybe spur additional tourism.
Saudi crown prince Mohammed bin Salman discussed his strategy last month in a rare English-language interview with Fox News. Tourism used to represent about 3% of the country’s GDP and now it’s about 7%, he said, without specifying the timeframe. In that same span, sports jumped from 0.4% to 1.5% of the Saudi GDP. Critics of this strategy use the term “sports washing” to imply that countries are spending on teams and events primarily to improve their public images.
“If sport washing is going to increase my GDP by way of 1%, then I will continue doing sport washing,” he said. “I have 1% growth of GDP from sports, and I am aiming for another 1.5%. Call it whatever you want, we are going to get that 1.5%.”
Saudi Arabia, Qatar and the United Arab Emirates are the Persian Gulf states that have spent the most in global sports in last few years. (Sportico has done business with an entity whose principals have ties to QIA.) All three back major European soccer teams, and all are pushing to attract more high-profile events within their borders. Qatar hosted the 2022 men’s World Cup; UFC partnered with Abu Dhabi for its recurring “Fight Island” events; and Saudi Arabia is hosting some of the biggest events in boxing, wrestling and MMA.
The Middle East is not monolithic—the countries are culturally different, with different political and economic aims—but all three have tried to position themselves as regional progressives in the last few years, including in their dealings with Israel. In March, the UAE signed the Arab world’s first free trade agreement with Israel. Many experts believe that Saudi Arabia’s recent willingness to normalize relations with Israel may have been a motivating factor in the Oct. 7 Hamas attacks.
In my conversations with sports owners and executives before last week’s attacks, this shift came up often. Justified or not, many viewed the moderate progress of some Middle Eastern governments as a rationale for relationships that decades ago might have been impossible.
Now, many of those same countries are in close conflict with Israel. Qatar’s first statement after the Hamas attack called on the international community to pressure Israel to stop its “flagrant violations” of international law, and to prevent an “asymmetrical war” in Gaza. Saudi Arabia underscored its “unwavering” support for the Palestinian people, while condemning “the loss of innocent lives.” Reuters reported that Saudi officials are putting their normalization plans with Israel “on ice” in response to recent events.
U.S. sports leagues, by contrast, have almost all issued statements condemning the terrorist acts and underlining their support for the Israeli people.
There are reputational considerations in every deal, in every business, in every part of the world, but few carry the sensitivity of the Palestinian-Israeli conflict. In the past week, people have lost their jobs, students have lost employment offers and universities have lost donors because of their public response to the fighting in Israel.
Sources say those dynamics, and the fear they stir up, are already affecting sports investments from sovereign wealth funds and agreements with local tourism authorities. Many of these same governments were already invested in sports through U.S.-based private equity funds, but the removal of that single layer of obscurity creates more proximity and more sensitivity.
Take, for example, the pending merger between the PGA Tour and Saudi-backed LIV Golf, which outlined Saudi Arabia’s Public Investment Fund (PIF) as the new organization’s sole outside backer. That deal likely got a lot more complicated in the last two weeks. Scroll through the comments on the PGA Tour’s Instagram statement after the Hamas attacks, and you’ll get a sense of how many fans drew connections between the Tour’s response and the pending merger.
That’s not to say all new deals in the region will be halted. Last Wednesday, UFC announced plans to host its first-ever event in Saudi Arabia. The MMA giant is partnering with the Saudi government’s General Entertainment Authority, which was established by royal decree in 2016 to develop the country’s entertainment industry. UFC recently combined its business with WWE, which has held events in Saudi Arabia for almost a decade.
Professional Fighters League founder and chairman Donn Davis, whose MMA company recently took a $100 million investment from PIF, said last week on the Sporticast podcast that he did not expect to see a prolonged retrenchment of opportunities in the Middle East.
“Sports tends to rise above geopolitics,” Davis said. “It does so in our country, and it tends to do so globally … Perhaps there will be turbulence in small events, but I think if you look at a 10- to 20-year horizon, sports will continue to be a unifier.”
Much of this will hinge on what happens in the next few weeks and months. We’ll probably learn more about the planning (and funding) of the Hamas attacks, and Israel is threatening a ground invasion that could further polarize the international community. Qatar hosts Hamas offices in Doha—a point of criticism from supporters of Israel—and has already mediated talks between the two sides, like it has for Palestinian conflicts in years past. Saudi Arabia’s ongoing response will also be closely watched.
I agree with Davis that on a much longer horizon, the impact on sports dealmakers will likely be temporary. Leagues and teams will always seek money, and sovereign wealth funds will always have it.