BY GEORGE HAY
The Saudi Arabian equivalents of Kremlinologists have something new to get their teeth into. Saudi Aramco is replacing its chairman, Energy Minister Khalid al-Falih, with the man who runs the country’s $300 billion sovereign wealth fund, Yasir al-Rumayyan. For Western investors pondering whether to buy into the oil giant’s stalled initial public offering, that brings a plus and a potentially bigger minus.
The good-ish news is that Aramco is flipping the script. Reflecting its role as a department of the kingdom, the group’s chair and the energy minister have always been the same person. Replacing Falih in one sense therefore creates welcome daylight between company and ministry. Having been a banker and at the core of the Public Investment Fund’s various investments in Uber and the SoftBank Vision Fund, Rumayyan may also be a fitting figure to lead a foreign listing.
Yet the move could exacerbate a bigger problem for foreign investors: the fact that Aramco’s strategy, along with nearly everything else in Saudi Arabia, is ultimately set by Mohammed bin Salman, the crown prince, who has been a controversial figure since the murder last year of journalist Jamal Khashoggi by Saudi agents – if not before. The PIF is central to the crown prince’s Vision 2030 agenda to diversify his country away from fossil fuels, and Rumayyan is a key ally. Hence if anything the links between the company and the centre of power are now tighter.
Non-Kremlinologists might say the changing of guard is irrelevant given MbS, as he’s known, calls the shots anyway. Aramco was, for example, recently obliged to spend $70 billion of its own money acquiring the PIF’s 70% stake in chemicals group SABIC, which was more about creating cash for Rumayyan’s fund to spend than any merger rationale. Still, Aramco’s decision to pay in installments implied some sort of independence, given it could have afforded the whole lot in one chunk. The scope for even such mild resistance looks even narrower now.
First published Sept. 3, 2019
(Image: REUTERS/Hamad I Mohammed)