Saudia Arabia is to set up its own sovereign national oil wealth fund from the proceeds of privatising just 5% of the state-owned oil company, Aramco.
Deputy Crown Prince Mohammed bin Salman said the world’s top oil exporter would raise the capital of its public investment fund to 7 trillion riyals (£1.38 trillion) from 600 billion riyals and would sell up to five percent of shares in Aramco.
In a state TV broadcast, Prince Mohammed bin Salman said the company was valued at up to $2.5tn and that part of the Aramco share sales would go towards creating a new $2tn sovereign wealth fund.
Norway’s sovereign oil wealth fund – estimated to be worth – $800 billion – is the largest in the world. The UK has no similar such fund.
So big is the state oil company because of its rights to the kingdom’s crude reserves, that selling even 1% of its value would create the biggest initial public offering (IPO) on earth, he said.
He added: “We have developed a case of oil addiction in Saudi Arabia. We will not allow our country ever to be at the mercy of commodity price volatility or external markets.”
Even before global crude oil prices started to plunge in 2014 to a 13 year low in January this year, economists had regarded Riyadh’s fiscal policy and economic structure as being unsustainable, but reduced income from energy sales has made reform more urgent.