The Government authorizes Saudi Arabia to land in the Spanish engine giant Renault and the Chinese Geely

Saudi Arabia is stepping up its presence in the Spanish business world. Aramco, the Arab country's state-owned oil giant, has obtained authorisation from the Council of Ministers to enter Horse, the Spanish motor company formed by Renault and the Chinese company Geely (Link & Co, Volvo Cars, Lotus, etc.) valued at 7.4 billion euros.

The Executive approved the purchase of 10% of Horse by Aramco on October 29, as revealed now in official documentation. Riyadh has articulated this operation through the Aramco subsidiary located in Singapore. Specifically, Saudi Arabia has obtained permission to buy 10% of Horse Powetrain Solutions SLU and Horse Powertrain Spain SL for 740 million euros.

The government's approval came almost a month before the Saudi group STC obtained the executive's approval for the acquisition of 10% of Telefónica for 2.1 billion euros . Horse is a joint venture formed by Renault and the Chinese giant Geely for the development of their thermal and hybrid engines.

The French state-owned company decided to locate its headquarters in Madrid less than two years ago, after a dispute with Romania, the birthplace of its Dacia brand, which also aspired to have that headquarters. Part of Renault's assets in Spain have been brought together in this company. Horse has an engine plant in Valladolid, the gearbox factory in Seville and part of the R&D centre in Valladolid. In 2023, the firm valued the assets in Spain at 1.273 billion euros. These facilities employ approximately 3,400 workers, which represents 28% of Renault's workforce in Spain. But Horse as a whole has 19,000 employees and 17 factories around the world.

The idea behind this joint venture is to be the engine supplier for various brands in addition to the French brand. Horse Powertrain supplies its engines to various industrial customers, including Renault, Geely, Volvo, Proton, Nissan and Mitsubishi. Aramco is involved in this industrial project. It underlines its position as one of the world's leading integrated energy and chemical companies.

“This investment aims to enhance Aramco’s contribution to the global energy transition through the development and commercialization of more efficient mobility solutions. The agreements also include collaboration agreements for Aramco and Valvoline on technologies, fuels and lubricants to collectively improve the performance of HORSE Powertrain Limited’s internal combustion engines (ICEs),” the Saudi firm said in its landing before obtaining government permission.

In order to control the investments that foreign capital is making in Spain, the Executive has created a whole set of regulations on foreign investments in the midst of the pandemic, which are being updated periodically. Under this umbrella, many foreign investments have to go through the Government's filter to be authorized, which assesses their suitability from the point of view of security, health and public order.

Most of the operations end up passing the filter, but not all. Last summer, the Executive vetoed the purchase of Talgo from a Hungarian consortium, citing security reasons. The Executive cited reports from the CNI that indicated that these investors could have ties to Vladimir Putin's Russian regime .

Saudi Arabia, for its part, is expanding its presence in Spain. In addition to the authorizations to enter Horse and Telefónica, it has had other relationships for years. Aramco itself has been a partner of Repsol since 2020 in synthetic fuel projects being developed at Petronor's facilities in Bilbao. In 2023, they announced a joint investment of 103 million euros for this alliance.

In addition to the above, Aramco has shown interest in entering Repsol's renewable energy subsidiary. The Saudi company hired BNP Paribas to analyze the purchase of 25% of this green energy division. However, negotiations are going slowly and since contacts between the two parties became known in April 2024, no new progress has yet been made.

The authorisations granted by the Spanish Government to Saudi companies have coincided with Riyadh's new orders for warships from Navantia. A few days after the investment authorisations for Telefónica and Horse were signed, the naval company, 100% owned by the Sociedad Estatal de Participaciones Industriales (SEPI), announced that it will build three new Avante 2200 corvettes for Saudi Arabia. This contract was sealed with the highest authorities of both parties in Riyadh last December.

“This contract represents around four million hours of work for the Bay of Cadiz, generating an impact of up to 2,000 jobs (direct, indirect and induced employment),” said Navantia, which plans to work until delivery in 2028. With this signing, the workload for Spanish shipyards is maintained after Navantia already delivered five corvettes built in the Bay of Cadiz to the Royal Saudi Navy. This delivery is part of a contract signed in 2018 for 1.8 billion euros .