Bahrain signs financing deal with Kuwait Fund as part of post-oil strategy

In an attempt to stabilize its national economy, Bahrain is reaching out to a regional assistance group in a big way.

August press reports show the Kuwait Fund for Arab Economic Development (KFAED), an agency for the provision and administration of financial and technical assistance, has signed financing agreements with Bahrain for over $1 billion for infrastructure and housing projects.

Along with pursuing financing, Bahrain’s leadership is also pursuing other goals that are also strategy points for other GCC nations, including Saudi Arabia. Bahrain has amped up its solar program, with a current capacity of 33 terawatt hours (TWh) per year, according to Solar GCC.

For its part, Saudi Arabia has set an ambitious goal for 9.5 gigawatts of solar power by 2030.

By now, it's common knowledge that many GCC countries have been forced to pivot economically due to historically low oil prices — it's part of a new trend that has Americans rejoicing at the pump but has further negative ramifications in other parts of the world.

What role will renewables play in the new economies of the GCC nations with oil below $50 a barrel?

“The Saudis, and others, are trying to diversify their investments," John Angelis, a business professor at Elizabethtown College, told the Gulf News Journal.

Renewables, Angelis said, are a big part of that equation, but although it’s a smart strategy, diversifying into solar has its dangers.

Angelis cited downward movements in the TAN exchange-traded fund tracking the solar industry, as well as individual solar stocks. “It’s taken quite a hit over the past year.” Angelis said of the TAN fund.

Overall, he said, solar could be headed for a downturn.

“There’s a concern that solar is going to take a step back in the short term, instead of a step forward.” Angelis said. “It’s not as much of a safe zone as it used to be.”

Also, he warned, where the last tech market bubble mainly affected stocks, another bubble crash could include bonds and other market sectors as well.

“The next bubble might not be easily contained in a certain sector.” Angelis said.

Angelis cited coverage of Saudi aims in the Economist, where for example, an April 30 story looks at remarks from Muhammad bin Salman, Saudi Arabia’s deputy crown prince, on a post-oil Saudi Arabia.

“It’s a clever thing they’re doing.” Angelis said, characterizing diversification into renewables as something that makes sense from an "MBA perspective" but is not without risk. “Saudi Arabia might very well invest wisely – but they could still be hurt.”

In addition to diversified investment, countries like Saudi Arabia are also turning toward international financing, with some taking out massive loans to pay salaries. Time will tell how the multichannel approaches will stabilize national economies that used to be very oil-dependent and what the international markets have in store. In any case, investments in renewables honor the kinds of international agreements that have been set against the global specter of climate change.