As Saudi Arabia’s deputy crown prince, Muhammad bin Salman is in a hurry. By his own admission, the House of Saud is decades behind. It no longer drives events, it is hostage. To stem the tide, Saudi Arabia needs to sell its most precious asset: ARAMCO, the world’s largest oil company. If it doesn’t privatize, liberalizing and diversifying its sources of growth, the Kingdom will run out of foreign exchange reserves in a few years. The rush is on, but so is the slight of hand.
The IPO itself, the largest in history, will attempt to do two things, hide any disclosure that actually reveals the innards of ARAMCO while raising money to work inside the capital markets of the Great Satan. Funny isn’t it, that every time the Arabs get in trouble they call the American’s (proxies agents for war) or they call the Israeli’s (desalinization plants). Both reveal a dearth of civil society and industrial base; it is a social disease of Islamic polities, they don’t create or transmit new capital.
The idea is to sell a stake (5%) and raise $150 billion to secure social security payments to subjects (not citizens) too archaic to actually work. As of now, bin Salman has decided to go half way and only list downstream, meaning marketing and distribution while resisting all independent audits regarding ARAMCO’s exploration and production capacities. Funny thing these Arabs have, they don’t compete on western terms, yet secured favorable terms are extended to them anyway. The Saudi’s fear lawsuits or claims on future revenues, they also worry about listing abroad; because the Arabs aren’t used to dealing with market based realities (Hayek’s ‘extended order‘), they fret over not possessing any advantage. They want it both ways, a fundamental feature of immature, archaic civilizations. In the end though, the Saudi’s will continue to use ARAMCO as a tool shaping OPEC policy. That too will fail. . . more on that another time.
As is stands now, the growth model of Saudi Arabia’s oil technocracy is dead. To secure an independent financial base to insure the growth of civil society, the Saudi’s need proceeds from capital markets to seed domestic diversification efforts.
The horse is out of the barn and with it, any hope of forestalling an inevitable clash with modernity. My monies on the youth who know better than the chartered financial analysts of Dubai or Dharan.