In a landmark move aimed at strengthening bilateral relations, Italy and Saudi Arabia have signed strategic partnership agreements worth approximately $10 billion. The announcement was made following a meeting between Italian Prime Minister Giorgia Meloni and Saudi Arabian Crown Prince Mohammed bin Salman Al Saud in the historic city of AlUla, Saudi Arabia, on January 26, 2025. The deals span critical sectors including infrastructure, energy, defense, tourism, entertainment, and sustainable development, further solidifying ties between the two nations.

Key Agreements Signed

Several high-profile agreements were finalized during the discussions, showcasing the deepening collaboration between Italy and Saudi Arabia. These include:

1. Loan Guarantees for NEOM

Italy’s export credit agency, SACE, confirmed it would provide $3 billion in loan guarantees to support the ambitious NEOM project, a cornerstone of Saudi Arabia’s Vision 2030 strategy.

• NEOM is a futuristic urban and industrial development located along the Red Sea. Envisioned as a global hub, it is expected to house nine million residents and operate on renewable energy.
• This funding is part of Italy’s broader commitment to supporting innovative and sustainable megaprojects that align with global climate goals.

2. Green Energy Collaboration

SACE also signed a Memorandum of Understanding (MoU) with the Saudi Electricity Company.

• The agreement will provide credit guarantees for green energy projects, including the construction and operation of renewable energy facilities.
• Italian energy companies, including Snam, have joined forces with Saudi Arabia’s ACWA Power to explore partnerships in the production and export of green hydrogen, a critical component in Europe’s clean energy transition.

3. Aerospace and Defense Cooperation

Italy’s leading defense company, Leonardo, entered an agreement to enhance collaboration in aerospace and defense technologies with Saudi partners.

• This partnership is expected to advance Saudi Arabia’s defense capabilities while fostering the growth of Italy’s aerospace industry.

4. Water Sustainability Initiatives

Italian electrode manufacturer Industrie De Nora signed agreements with Saudi stakeholders, including ACWA Power and the Saudi Water Authority.

• The focus will be on developing innovative solutions for water desalination, an essential requirement for Saudi Arabia’s arid climate.
• The partnership also includes pilot projects aimed at improving the efficiency of water treatment and distribution systems.

Strategic Implications of the Partnership

The agreements mark a pivotal moment in Italy-Saudi relations, reflecting their shared commitment to economic growth, innovation, and sustainability. Both nations have emphasized the importance of cooperation in emerging sectors such as green energy and advanced technology.

Vision 2030: Saudi Arabia’s Ambitious Development Plan

Crown Prince Mohammed bin Salman’s Vision 2030 aims to diversify the Kingdom’s economy away from oil dependence by investing in infrastructure, technology, and sustainable industries.

• The NEOM project, which alone has a projected cost of over $500 billion, represents the centerpiece of this vision. With Italy’s support, NEOM is expected to set new standards for urban living, sustainability, and technological innovation.
• The collaboration also aligns with the Kingdom’s goal to become a global leader in renewable energy production, particularly green hydrogen.

Italy’s Economic and Strategic Interests

For Italy, the agreements offer a unique opportunity to strengthen its economic presence in the Gulf region.

• The $10 billion partnership will provide Italian companies with access to lucrative contracts in Saudi Arabia’s rapidly expanding economy.
• Italy, which is the second-largest manufacturing economy in Europe, is leveraging its expertise in engineering, renewable energy, and advanced manufacturing to build long-term partnerships with the Kingdom.

Regional and Global Context

1. Geopolitical Significance

The agreements also hold geopolitical implications, as both leaders discussed pressing international issues during their meeting.

• Topics included achieving a just and lasting peace in Ukraine, consolidating the ceasefire in Gaza, and supporting post-war reconstruction in Syria.
• Saudi Arabia’s growing influence in Middle Eastern geopolitics was underscored by Italy’s endorsement of Saudi participation in the GCAP (Global Combat Air Program), a next-generation fighter jet development initiative.

2. Strengthening Saudi-European Relations

The partnership reflects a broader trend of increased cooperation between Saudi Arabia and European nations, particularly in light of the global energy transition.

• Saudi Arabia’s vast resources and commitment to green initiatives make it a strategic partner for Europe, which is seeking to reduce its reliance on fossil fuels and diversify its energy sources.
• Italy, as a prominent member of the European Union, is well-positioned to act as a bridge between the EU and Saudi Arabia.

Economic and Environmental Impact

1. Boosting Job Creation and Innovation

The agreements are expected to generate thousands of jobs across multiple sectors in both countries.

• In Saudi Arabia, the focus will be on building technical expertise and fostering innovation to support the Vision 2030 goals.
• Italian companies will benefit from increased export opportunities and enhanced global competitiveness.

2. Advancing Sustainability

The partnership underscores both nations’ commitment to sustainability.

• The focus on green hydrogen, renewable energy, and water desalination aligns with global efforts to combat climate change and ensure environmental resilience.
• NEOM’s development as a zero-carbon city sets an example for future urban planning projects worldwide.

Challenges and Opportunities

1. Navigating Regulatory and Political Landscapes

While the agreements represent a significant step forward, both nations must address potential challenges related to regulatory compliance and political dynamics.

• The success of NEOM and other projects will depend on seamless collaboration between public and private stakeholders.
• Italy’s support for Saudi participation in the GCAP jet fighter program highlights the complexities of integrating new partners into multilateral defense initiatives.

2. Strengthening Bilateral Relations

The partnership provides an opportunity for both nations to deepen cultural and economic ties.

• Tourism and entertainment are areas where bilateral collaboration could yield mutual benefits, particularly as Saudi Arabia seeks to position itself as a global tourist destination.

Conclusion

The signing of $10 billion in strategic agreements between Italy and Saudi Arabia marks a new chapter in their bilateral relationship. By aligning their economic and strategic interests, the two nations are setting the stage for long-term cooperation across critical sectors.

For Saudi Arabia, the partnership advances its Vision 2030 objectives and cements its role as a global leader in sustainability and innovation. For Italy, the agreements provide access to high-growth markets and reaffirm its commitment to fostering international collaboration.

As the world transitions to a greener and more interconnected future, partnerships like this one will play a vital role in shaping the global economic landscape

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

28^th January, 2025