LIV Golf is Saudi Arabia's reputation laundering service
And Trump is helping.
Note from Aaron: Working with expert authors like Bradley and Scott who are skilled at breaking down complicated issues requires resources, so if you’re a free subscriber who appreciates this work and has the means, I humbly ask you to support Public Notice with a paid subscription. Thank you.
By Bradley S. Klein and Scott G. Nelson
During this weekend’s Masters golf tournament at Augusta National Golf Club in Georgia, there’s always talk about the business of the much vaunted game. This time around, the focus of those conversations will be about a challenge to business as usual.
Every once in a while a seemingly secure, well-established sports league gets challenged by an upstart. It is happening now to the PGA Tour with the emergence of LIV Golf, the new professional golf circuit lavishly funded by Saudi Arabia. Now in its second year, LIV Golf aspires to transform professional golf. But its sights appear set on an even bigger prize, one with far-reaching consequences for US politics and even international relations.
There can be little doubt that LIV Golf provides Saudi Arabia with reputation laundering services in the most economically and politically progressive markets that the kingdom’s archaic mono-economy serves. After the killing of Washington Post journalist Jamal Khashoggi at the Saudi consulate in Istanbul in October of 2018, the regime of Crown Prince Mohammed Bin Salman has required a much different image in its dearest export market of all — the West. LIV Golf fits this bill very well.
But LIV Golf represents something even more fundamental — the entrance into politics of a major new powerbroker in national as well as international affairs. Not a new nation-state, not an international organization, but a colossal investment concern capable of wielding power by infiltrating national politics at what can be best described as a sub-political level. How it is able to exercise this power in the world’s largest economy should be of concern to all citizens.
The United States is unique among major political powers in that its politics is often carried out through cultural circuitry rather than accepted institutions. What is particularly alarming about LIV Golf is that it appears to represent Saudi Arabia’s desire to diversify its foreign holdings through a new headline-grabbing and high-risk asset class, one with unique purchase in the cultural landscape provided by a major world sport. Here is a new sports league geared toward a large and affluent audience in the biggest markets for its main export commodity — crude oil. The fact that the particular business model chosen for the newcomer tour has no chance of ever making a profit seems not to worry the Saudis at all. They are in it for something else entirely — something that only endless supplies of capital can buy.
Trump helps LIV wage war against the PGA
It's impossible to get inside Saudi Crown Prince Mohammed bin Salman’s head, but he is nothing if not a shrewd practitioner. He certainly recognizes that his power is not limited by his country’s small population and the Persian Gulf’s famously fractious politics. Perhaps he has learned from other autocrats that there’s a currency of power readily available to him, a currency that is the trade of a devastating new politics. It is likely that he has surmised — as have others — that American voters are uniquely impressionable, and that the whole election system is vulnerable to manipulation. To be sure, election meddling cannot happen directly — at least not yet. But if nothing else, Americans have learned it is possible to affect election outcomes from the edges by sowing doubt and mistrust, two of the greatest weapons that can be used against democracy.
It may not be a coincidence that Donald Trump, whose family has received billions from MBS’s regime, finds himself aligned with LIV Golf. LIV ran eight events last year and is slated for 14 tournament events this year — half of them in the US. Trump’s eponymous clubs were host to two of the first four US events on the LIV Tour last year and will be home to three of the seven US events on the 2023 calendar. Yet, tournament sites are not the half of what looks to be a new political calculus.
In an attempt to lure American PGA Tour stars to its ranks last year, LIV offered tournament purses that dwarfed those available to players on the Tour. It also reduced the tournament fields to a third as many contestants and shrank events from a standard four rounds to three; hence the Roman numeral LIV, which indicates a 54-hole event. In the process LIV Golf has eliminated the dreaded “cut,” whereby roughly half the field is sent home after two rounds for underperforming — and not getting a paycheck.
To build up overnight out of nothing and to compete on a world scale, LIV dangled enormous bonuses to stars like Phil Mickelson and Dustin Johnson, each of whom got upwards of $100 million upfront just to enlist. Meanwhile, the real prize, landing Tiger Woods, could not be secured in spite of a package said to have exceeded $700 million — six times his career earnings in his 28 years on the PGA Tour.
LIV and its titular head, former golf champion turned self-styled corporate innovator Greg Norman, played up the disruptive, innovative aspects of their tour as they threw around money never before seen in golf. Along the way they did not prove shy about boasting of their efforts to shunt aside the PGA Tour for a circuit that was louder, brasher, and crasser in its money grabs. Of course, they also gave a token nod to what has become one of golf’s finest cultural accoutrements — the marketing mantra of “grow the game worldwide.”
The PGA Tour repelled the raid on its talent by pointing to the exclusive arrangements that it said contractually bound the Tour’s players, preventing them from playing both tours simultaneously. If Tour golfers wanted to join LIV, fine, but their PGA careers were over, and they would likely never be welcomed back.
That made for some tough choices. The bulk of the defectors were on the “B” side of their careers, due to age, injury, or boredom (see Bryson DeChambeau, Sergio Garcia, Brooks Koepka, Lee Westwood). Their departure, according to PGA Tour Commissioner Jay Monahan, now prevents them from playing regular PGA Tour events. When it comes to the four separately owned and managed “major championships,” however — the Masters, PGA Championship, US Open, and British Open — some of the renegades still might qualify through a complicated world rankings system (or as former champions of those events).
It didn’t take long during LIV Golf’s inaugural season for the lawsuits to get filed. Ten players joined in an antitrust suit against the PGA Tour for holding back their ability to earn a living as they chose. LIV Golf soon took over the suit, then found itself on the receiving end of a countermove by the PGA Tour that would require LIV Golf to make available through deposition the terms of its ties to the $600 billion Saudi sovereign wealth fund. The suit remains in US courts and is unlikely to be resolved for at least a year.
This sports-business context is important to grasp because it is being played out in novel ways that touch on the nation’s present politics. America’s political culture could be the greatest casualty. That is why the role played by one of the world’s largest sovereign wealth funds needs to be considered carefully.
Sports washing
Sovereign wealth funds are massive investment vehicles that resource-rich states have been establishing since the 1950s. In recent years, though, these funds have been used in unorthodox fashion. Or, we should say some governments are using these funds in unorthodox ways.
Typically, these are government funds set up by countries awash in oil or natural gas — countries like Kuwait, Norway, Saudi Arabia, and Russia — to make strategic investments overseas. Huge stores of wealth have been built up over many years, which is the reason high-return investments outside of these countries are pursued. These wealth funds are forced to seek investment opportunities abroad because investing too much at home pushes up the value of an economy’s currency, which can hurt export industries.
For most of our (and our readers’) lifetime, countries that ran massive account surpluses — countries like Saudi Arabia and China, and city-states like Singapore — accumulated substantial reserves that were invested in the most mundane asset class imaginable: US government bonds. This was because US treasuries were among the safest assets around. Given the size of the US economy, and given the spending habits of US consumers, government bonds were also in almost infinite supply. Returns were low, but so were the risks.
In an era of hydrocarbon booms, however, economies like Norway, Russia, and Saudi Arabia began to look for much higher returns in a world economy that was much more diversified than just a generation ago. With higher risk tolerance, these funds started to pursue more diversified assets, ranging from real estate to shares of big companies to the acquisition of sports teams. The investments ranged from the legal and transparent to the not-so-legal and opaque. It is believed that Russian oligarchs stealing massive sums from Russia over the past three decades were a significant part of Russia’s sovereign wealth fund. Investing stolen capital overseas usually required laundering — services that financial and legal entities in London, New York, Zurich and other financial capitals were happy to provide.
It’s hard to paper over the fact of authoritarian rule. But the Saudis appear to have calculated that to enhance their political position in their region and throughout the world, they needed to compete not just on a geopolitical front, but on a cultural one as well. The genteel landscape of professional golf would potentially give the Saudis a level of political saturation that could only be achieved when politics is played out on a cultural plane rather than an institutional one. It is not too cynical to say that Trump-owned properties are among those platforms where the Saudis seek legitimacy and clout. And Trump himself secures a certain level of diplomatic relevance by currying favor with his business allies in Saudi Arabia and other nondemocratic countries.
At a news conference in May 2022, LIV Golf Chairman Greg Norman defended the Saudis and their business strategy, remarking, “Look, we’ve all make mistakes and you just want to learn by those mistakes and how you can correct them going forward.” Apparently mistakes just fall into one large category of bad decisions — spouses make mistakes in marriages, children make mistakes in school, and, if US intelligence is to be trusted, rulers make mistakes in murdering journalists.
Golf, it would seem, provides a perfectly civilized point of engagement — for forgiving, forgetting, and somehow moving on. Into what future is the question. The challenge this time is not just to traditional golf or business as usual, but using sports as a means through which power can be leveraged and respectability reclaimed.