The acquisition of a 9.9% stake in Telefónica by Saudi telecoms giant STC – 64% controlled by the Saudi sovereign wealth fund – has rightly opened up a lot of questions on foreign ownership of so-called “critical” and strategic assets. Given its activities in cybersecurity for the Spanish armed forces and its supplying systems, equipment satellite services to the Defence Ministry, Telefónica could certainly be defined as a strategic asset. This is not just a Spanish question, but a European one, considering that Telefónica’s business falls within a recently published European Commission communication on “critical” technologies, which require greater vigilance on the part of Member States. In this respect, the Spanish government is reviewing STC’s $2.25 billion proposed investment: a government veto, a string of conditions on the deal, as well as extra questions from Bruxelles, could be on the cards. But assessment of this deal should then spur proper strategic thinking on Saudi Arabia’s new geo-economic strategy for a multipolar world.

The role of Saudi Arabia on the international stage has fundamentally transformed over the past few years. Following the geopolitical shifts and the energy security crisis triggered by Russia’s invasion of Ukraine in February 2022, the Kingdom leveraged its unique position as the world’s most important swing producer – i.e. energy producer able to affect prices most easily and rapidly – to go from regional to global player. Saudi Arabia still aims to be the leader and pivot of the wider Middle East and North Africa region, expecting to be the first port-of-call for external actors wanting to do business in the region. But Saudi ambitions now go much beyond the MENA region, including to escape its “forever wars.”

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Saudi Arabia has gone global by embracing multipolarity, a world order in which the United States has lost its undisputed hegemony and other players are rising, opening new opportunities for growth. Riyadh has so far deployed its greater geopolitical weight by engaging in cost-free extreme hedging between rival global and regional players, as the best way to secure its national interests. It has departed from full alignment to the United States, most notably when rejecting requests from the highest level of US policy-makers to increase oil production and instead coordinated with Russia to cut it and drive prices upwards in October 2022. Or when it conducted the first maritime security exercises with the Chinese navy in 2023, or applied to join BRICS from January 2024. And yet this has not meant a new Saudi alignment with Russia or China either. Indeed, before the initiative was derailed by Hamas’ terrorist attack against Israel on October 7 and subsequent Israeli retaliation against Palestinians, which inflamed the Arab-Islamic public opinion, Saudi Arabia was also discussing the possibility to normalize relations with the Israeli government, thus handing a resounding geopolitical victory to the US that would have come with a significant new security pact between Riyadh and Washington. Simply put, in its attempt to play on global questions, Saudi Arabia is pursuing a diversification of its partnerships towards both West and East.

In this context, there is space also for Europe: the EU has boosted its political engagement with Riyadh, also through the first-ever Gulf strategy published in 2022, and is working to facilitate trade and investment relations, including via the first edition in October 2023 of the EU-Saudi Investment Forum, focused on sustainable energy, critical raw materials, and also information and communication technology. Individual European governments have similarly intensified their outreach to Riyadh, signing deals on technological cooperation in the energy transition and, of course, the India-Middle East-Europe economic corridor (IMEC), a project for economic, energy and digital connectivity linking India to Europe via the United Arab Emirates, Saudi Arabia, Jordan and Israel signed on the side-lines of the G20 in New Delhi.  

A project like IMEC goes at the heart of Saudi ambitions. While after the COVID-19 pandemic and the Russian invasion of Ukraine, the US and Europe started to see the risks and vulnerabilities linked to dependencies, Saudi Arabia sees its geopolitical centrality as depending on the ability to be a hub for energy and economic connectivity, capitalising fully on its assets and location between Asia, Africa and Europe. With projects like the India-Middle East-Europe economic corridor and the Belt and Road Initiative, Riyadh intends to further enhance connectivity – technological, infrastructural, commercial and financial. 



The STC-Telefónica deal falls precisely into these frameworks, because it is expected to enable the Saudi side to accelerate its capabilities on digital connectivity, in the MENA region and beyond. The deal would acquire extra strategic value from a European perspective if it would lead to Telefònica being selected to build Saudi Arabia's defence and intelligence mission-critical communications, a bid for which Chinese tech giant Huawei is lobbying hard in Riyadh. Huawei already has strategic agreements with STC, for the provision of 5G technology and the building of a local data centre in the Kingdom. It goes without saying that these deals do raise eyebrows in Europe and the US. Indeed, Riyadh is also becoming aware that there could be a price to pay—at least in terms of missed opportunities—for excessively close relations with China. For example, contacts with sanctioned Chinese defence firms recently led to the collapse of a mega-deal between Saudi firm SCOPA Defence and a US counterpart RTX, which would have provided Saudi Arabia with the technological know-how to build sophisticated air defence systems. In August 2023, the US also expanded restriction of exports of sophisticated Nvidia and Advanced Micro Devices artificial intelligence chips beyond China to other regions, including undisclosed MENA countries. 

Europeans need to take into account all of these multipolar complexities in their relations with Saudi Arabia, and this goes also for the Spanish government. Europeans have so far viewed their engagement with Saudi Arabia as a function of their mostly economic interests or in the context of their wish for Middle Eastern stability, they now should also be aware that there is a new Saudi angle to global conversations. Disengaging Saudi Arabia would mean missing significant opportunities, not just from an economic point of view, but also from a geopolitical one, as Europeans would be cut off from a regional pivot and utterly unable to influence a player that can impact global questions – even beyond energy security – and global trends. Still, Europeans need to be clear-eyed about Saudi Arabia’s growing strategic ambiguity in international alignment. 

A working approach could be one that leverages European technological edge to become strategic partner-of-choice for Riyadh in domains that are of core value for the Kingdom, such as the green transition, space exploration and, indeed, telecommunications. At the same time, Europeans should actively involve Saudi Arabia in the de-risking conversation, highlighting the potential benefits of friend-shoring but also the consequences of being viewed as backdoors for Russia and China into Western technology, financial trading and services markets. That means communicating to Saudi counterparts the option to officially place Saudi Arabia under further scrutiny in the context of the EU’s economic security strategy.

Multipolarity is a new world order that no actor is yet confident in navigating. However, it is an undeniable reality, especially in the MENA region. It has resulted not just in a more fragmented world, but also in the rise of middle powers like Saudi Arabia, driven by new ambitions. The STC-Telefónica deal is one template for what this means for our interests that Europeans should closely watch.