Saudi Arabia’s Crown Prince, Mohammed bin Salman, has announced the transfer of a 4% stake in the oil giant Saudi Aramco to a subsidiary of the country’s sovereign wealth fund. The move aims to further boost the kingdom’s economy and its efforts to diversify beyond oil. The announcement was made on Sunday, 17th April, by the state-run Saudi Press Agency.
The 4% stake will be transferred to the Saudi Arabian Investment Co., known as Sanabil Investments, which operates under the sovereign wealth fund, the Public Investment Fund (PIF). The transfer is a private one between the state and Sanabil, and Saudi Aramco is not a party to the transaction, as stated by the company in a stock market filing.
The transfer of the 4% stake in Saudi Aramco is the second of its kind to the sovereign wealth fund, with the first transfer of 4% announced in February 2022. The Saudi government remains the oil firm’s largest shareholder, owning over 90% of its stock. Only 1.73% of Saudi Aramco’s stock is traded on Saudi Arabia’s Tadawul stock market since the company’s initial public offering in 2019.
Saudi Aramco has a market value of $1.94 trillion, making it the world’s third most valuable firm, behind Apple and Microsoft. The 4% stake is worth an estimated $77.6 billion, according to reports. The transfer of the stake will strengthen the financial position and credit rating of the sovereign wealth fund, according to the statement issued by the Saudi Press Agency.
The move comes as Saudi Arabia seeks to diversify its economy and reduce its dependence on oil revenues. Crown Prince Mohammed bin Salman has been spearheading the kingdom’s efforts to develop other industries, such as tourism and entertainment. One of the crown prince’s projects is the $500 billion futuristic desert city called Neom.
Critics of Saudi Arabia’s oil industry and the burning of fossil fuels have voiced concerns about the impact of the industry on the environment and climate change. Saudi Arabia has some of the world’s largest oil reserves and is one of the least expensive places to produce crude oil. However, the crown prince’s diversification efforts aim to reduce the country’s dependence on oil sales and to develop other sources of income for the kingdom.
In 2021, Saudi Aramco reported a profit of $161 billion, the highest-ever recorded by a publicly listed company. The company’s earnings were boosted by the rising prices of energy after Russia launched its war on Ukraine in February 2022. Sanctions limiting the sale of Moscow’s oil and natural gas in Western markets caused energy prices to rise, further fueling global inflation worries.
The transfer of the 4% stake in Saudi Aramco to the sovereign wealth fund is part of Saudi Arabia’s efforts to boost its economy and diversify beyond oil. With the transfer, the sovereign wealth fund is expected to have a stronger financial position and credit rating. However, critics have expressed concerns about the impact of the oil industry on the environment and climate change.