Saudi Arabia Strengthens Its Trading Ties With Sweden
By Keith Boyfield*
A step change in significantly improved trade relations between Saudi Arabia and Sweden is the dangling prize waiting to be seized by the new Swedish coalition government, headed by Ulf Kristersson, which assumed power last month. Admittedly, Sweden’s government has a challenging agenda to manage, including the country’s response to the Ukrainian conflict and its knock-on impact on energy prices and security of supply. Russia’s aggression this year has prompted Sweden to seek to join NATO, although final admission arrangements still require a resolution of objections raised by Turkey, which is already a member.
Sweden will shortly assume the Presidency of the Council of the European Union (EU) at a crucial time for European unity on a range of pressing issues, notably security, energy supply, and fiscal policy. While holding the Presidency, Sweden is likely to play an influential role in consolidating political, economic and cultural relations between the EU and the Gulf Cooperation Council (GCC) countries. Sweden is also focused on combatting terrorism and extremism among its population. This issue played a pivotal role in the recent election result.
For its part, the Kingdom of Saudi Arabia is reaping the benefits of a rapidly increasing growth rate in its gross domestic product (GDP) as it emerges from the ravages of the Covid-19 pandemic and the price of hydrocarbons recovers after a period in the doldrums. In April 2020, when the pandemic first gripped global markets, the price of Brent oil crashed to under $20 a barrel. However, it subsequently climbed to over $120 a barrel in late May 2022, mirroring worldwide concern about the Ukraine conflict; this autumn the oil price is hovering at just under $100 a barrel (see Figure 1 below). The Organisation of the Petroleum Exporting Countries (OPEC) Plus statement issued in October 2022 announced a reduction in overall production targets and this move is likely to contribute to robust oil prices through this winter in the Northern Hemisphere as demand continues to exceed available supply. Significantly, Saudi Arabia is one of the few producing countries with any spare capacity.
Figure 1: Brent Crude Oil Price Over the Five Year Period (October 2017-October 2022)
Buoyant oil demand has spurred strong growth in the Saudi economy. This year it is forecast to reach 8%, making it one of the fastest growing economies in the world (the International Monetary Fund’s (IMF) latest forecast indicates a slightly lower growth figure of 7.6%). Both Saudi Arabia’s Ministry of Finance and the IMF are predicating a slow-down next year, but the pace of economic growth largely hinges on global oil prices. Interestingly, the Saudi Ministry of Finance has opted to adopt a cautious stance in its preliminary budget report, released on 30 September 2022, indicating a potential growth rate of 3.1% next year.[i]
While oil related activities have recorded strong growth, it is also important to note that non-oil activities grew by 8.2% in the second quarter of 2022; with wholesale & retail trade, restaurants & hotels recording the biggest increase — an impressive 16.4%, followed by manufacturing excluding petroleum refining (12.1%), construction (8.8%) and transport, storage and communication (7.8%).[ii]
Trade Relations Between Saudi Arabia and Sweden
Sweden boasts one of the best performing economies in Europe. It ranked eighth among 45 countries in Europe according to the latest 2022 Index of Economic Freedom,[iii] while on a global basis it ranks eleventh for economic freedom and open markets.
Clearly, there is considerable potential to secure over the next few years in terms of greater trade exchange between Sweden and Saudi Arabia. Currently, around 4% of Swedish exports go to the Middle East and Africa. But these two regions offer great potential, not least because of their rapidly expanding populations and, in the case of Saudi Arabia, a meteoric increase in GDP over the last couple of years. Trade statistics reveal that Saudi Arabia is by far the largest trading partner for Sweden in the Middle East. Over the last five years, it is estimated that the total volume of trade between the two countries amounted to more than $6 billion.[iv]
Tables 1 and 2 below show that trade in goods is heavily slanted in favour of Swedish exports to Saudi Arabia. Last year alone, the ten most popular categories of goods exported by Sweden to Saudi Arabia exceeded $1.1 billion, and there is scope for growth with the boom in oil prices. Iron ore, timber, and hydropower, are the three main categories that constitute the resource base of Sweden’s export orientated manufacturing-based economy, and the first two of these feature in the top three most popular exports to Saudi Arabia. As Table 1 illustrates, all the top ten Swedish export categories ran well into the millions with ore (notably iron ore) totalling almost $500 million. Pharmaceutical products, a strong suit for Sweden, ranked second at $233 million, while timber and wood products came third with a total of just over $110 million. Machinery for boilers and nuclear power stations ranked fourth at a little under $80 million. Significantly, Sweden has opted to press ahead with its nuclear power programme, so there may be substantial potential to increase this annual total. Electrical equipment is also important and ranked fifth in last year’s league table with a total of $58.37 million.
Table 1: Saudi Arabia’s Top Ten Imports (Goods) from Sweden in 2021
Paper products ranked sixth, with a similar total of just over $58 million, while vehicles – essentially Volvos – took seventh position in the rankings. Saab no longer manufactures vehicles, although it is a significant player in the aerospace and aviation field. Volvo sold 698,693 vehicles in 2021, an increase of 5.6 % on the previous year. Fully electric or plug-in hybrids grew by a remarkable 64% while recharge care comprised 27% of the company’s total global sales in 2021.[v] The two remaining categories relating to Swedish exports to Saudi Arabia comprised iron and steel products and optical, photo and technical apparatus.
Turning to Swedish imports from Saudi Arabia, the trade statistics for 2021 show that the ten most popular product categories are dominated by one commodity, namely plastics. This has proved to be a highly successful export for Saudi Arabia with sales of nearly $90 million recorded last year. Interestingly, in 2021, Saudi Arabia sold over four times as many plastic goods, in terms of dollar value, as Sweden managed to export to the Kingdom. A long way behind comes electrical and electronic equipment at just over $2 million, with fruits and nuts ranked third at nearly $1.3 million. Building materials, such as plaster and cement, follow at a shade under $1 million followed by optical, photo and technical apparatus in sixth position with total sales of $718,000. The other three categories making up the top ten are less noteworthy and do not, as yet, constitute significant sums.
Table 2: Saudi Arabia’s Top Ten Exports (Goods) to Sweden in 2021
The trade figures shown in these two table omit trade in services, where Sweden boasts major strengths, notably in financial services. Sweden has built up a successful banking and finance sector with names such as Handelsbank boasting a particularly strong credit profile. Sweden also has buoyant civil engineering and computer/IT sectors that have a lot to offer to Saudi Arabia. The country’s vibrant services sector is often overlooked. The services sector actually represents 36% of the Saudi wealth with the wholesale and retail trade sectors together with restaurants and hotels contributing 8%, and finance, insurance and real estate a further 7.9%.[vi]
Future Prospects: Areas Where the Two Countries Can Cooperate to Mutual Benefit
Saudi Arabia’s economy is increasingly diverse, as the economic growth figures reflect. The country can point to growing strengths in construction, manufacturing and retail, along with financial services. The country ranks ninth among 14 countries in the Middle East and North Africa region, according to the latest 2022 Index of Economic Freedom. The authors of the Index point out that a renewed effort needs to be made to tackle certain issues such as regulatory reform. Significantly, Riyadh launched a new programme last year to encourage foreign direct investment. In this context, it has reviewed regulatory rules restricting foreign investors owning a controlling stake in local companies, including those in financial services. A further initiative to encourage women to enter the labour force is also under way. An under-appreciated fact about Saudi Arabia is that for several years now more than half its citizens graduating from university are women.[vii]
Riyadh has launched a concerted push to attract foreign investors to the country. The recent IIF ‘Davos in the Desert’ conference, held in October 2022, demonstrated this commitment. A wide range of major international investors and big names attended the conference, including Jamie Dimon, CEO of J P Morgan Chase; Steve Shwarzman, the co-founder of Blackstone, one of the world’s largest private equity firms; along with David Solomon, the head of Goldman Sachs. The Saudi Public Investment Fund (PIF) is investing $40 billion a year in the Kingdom, with the new city complex at Neom generating considerable investor interest. This is one of the PIF’s pathfinding projects. The ultimate goal is to create a smart city 30 times larger than New York, incorporating a financial hub, a technology complex and a wide range of leisure and entertainment facilities. The PIF is one of the most active and influential sovereign wealth funds in the world today, and aims to manage assets amounting to a staggering $1.07 trillion by 2025.[viii] Almost a quarter (24%) of these assets will be held outside the country. In this context, Saudi Arabia is a hugely significant investor and trading partner for Sweden.
Neom derives its name from the root neo meaning new (from the Greek neos) and m, the Arabic word mostaqbal, or future.
With higher oil and gas revenues because of buoyant demand, Saudi Arabia has more money to channel into large-scale investment projects, such as infrastructure and housing for its rapidly expanding population. This trend plays to Sweden’s strengths as it had built up some of the world’s most experienced and skilful civil engineering companies. For example, the ABB, a Swedish-Swiss conglomerate, backed by the Wallenberg family, is recognised as one of the leading manufacturers of electrical equipment, robotics and automation technology. Saudi Arabia is Sweden’s largest export market in the Gulf region, and it is important to note that Swedish companies have been present in the area for more than 70 years.
Crucially, foreign capital and know-how form an important pillar of the Saudi economic strategy, aimed at diversifying the economy away from hydrocarbons. The opportunity centres on attracting citizens into an expanding private sector, where they might find well paid jobs. Swedish know-how and experience could offer considerable benefits as Saudi Arabia seeks to transform its economy over the next decade.
Recently a Saudi Swedish Business Council has been established in Stockholm to exchange expertise and knowledge. In January 2022, a two day event was held at Expo 2020 Dubai, to focus on future investment opportunities for Saudi Arabian and Swedish companies. Commissioner General Hussain Hanbazazah, responsible for the Saudi Pavilion, observed that the newly created Saudi Swedish Business Council was intended to set ‘plans and programmes to seize investment opportunities and turn them into tangible partnerships.’[ix] The Dubai event paid special attention to digital transformation and sustainability, including building Saudi Arabia’s circular economy and related investment opportunities.
It is also encouraging to note the very positive meeting held earlier this Spring in Riyadh when Dr Nayef Al-Hajraf, the Secretary General of the GCC, received the then Foreign Affairs Minister, Anne Christine Linde, and Ambassador Peter Semneby, Sweden’s Special Envoy to Yemen.[x] At this meeting, Dr Al-Hajraf stressed the importance of boosting GCC-Swedish relations across a range of political and economic fields to serve common interests. Accordingly, the onus is now on the new coalition government, formed by Ulf Kristersson, to capitalise on these opportunities.
Secretary General of the Gulf Cooperation Council (GCC), Dr Nayef Al Hajraf, received Swedish Foreign Affairs Minister, Anne Christine Linde, in March 2022.
Looking ahead, bearing in mind spiralling demand for technological innovation across the Gulf, Sweden is well positioned to offer a range of expertise and experience in ICT, transport logistics, health and infrastructure planning. This skill-set is specifically relevant to Saudi Arabia as it develops its national infrastructure and, specifically, the digital city complex at Neom. This is predicted to become one of the region’s principal urban hubs. Building on the preparatory work undertaken in the last few years, Saudi Arabia and Sweden are now in a position to capitalise on the considerable commercial potential presented by the fast-changing economic forces reconfiguring their citizens’ daily lives.
*Keith Boyfield is a Senior Fellow of the Euro Gulf Information Centre.
17 November 2022
[i] Dania Saadi, ‘Saudi Arabia forecasts lower growth, revenue for 2023 amid uncertain global economic outlook,’ 2 October 2022, https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/oil/100222-saudi-arabia-forecasts-lower-gdp-revenue-for-2023-amid-uncertain-global-economic-outlook.
[ii] Trading Economics, ‘Saudi Arabia GDP Annual Growth Rate,’ https://tradingeconomics.com/saudi-arabia/gdp-growth-annual.
[iii] Heritage Foundation, ‘2022 Index of Economic Freedom,’ https://www.heritage.org/index/ranking.
[iv] Trade Arabia, ’Saudi Arabia, Sweden explore investment opportunities,’ 21 January 2022, http://www.tradearabia.com/news/IT_392062.html.
[v] Volvo Cars, ’Volvo Cars reports all-time high revenue and profitability for the full year 2021,’ 11 February 2022, https://www.media.volvocars.com/global/en-gb/media/pressreleases/294767/volvo-cars-reports-all-time-high-revenue-and-profitability-for-the-full-year-2021.
[vi] Trading Economics, ‘Saudi Arabia GDP Annual Growth Rate,’
[vii] Saudi Gazette, ‘More women than men in Saudi universities, says ministry,’ Al Arabiya, https://english.alarabiya.net/perspective/features/2015/05/28/More-women-than-men-in-Saudi-universities-says-ministry.
[viii] ‘Saudi wealth fund targets $24bn investment in Arab states,’ Financial Times, 26 October 2022, https://www.ft.com/content/fefe4857-10b8-497b-9904-da86daf5c7bb.
[ix] Trade Arabia, ’Saudi Arabia, Sweden explore investment opportunities,’
[x] Saudi Gazette, ‘GCC Secretary General reviews GCC-Swedish relations,’ 28 March 2022, https://saudigazette.com.sa/article/618695.