Saudi Arabia transfers additional Aramco shares to the Public Investment Fund

Saudi Arabia has transferred a new tranche of shares of the Saudi oil giant Aramco to the Public Investment Fund (PIF) on Thursday, as part of a wide-ranging reform program in the kingdom.

Saudi Crown Prince Mohammed bin Salman "announced the completion of the transfer of 8% of the total shares issued by Aramco (...) to companies 100% owned by PIF," the official SPA news agency reported, noting that the state's share will be 82.186%, compared to 16% for the sovereign wealth fund.

In 2022, the oil monarchy had already transferred a first tranche of shares, equivalent to 4% of the capital, directly to the PIF.

A second transfer was made last year to a company owned by it, for the same number of shares, representing nearly $80 billion at the time.

This new operation "is in line with Saudi Arabia's long-term initiatives to stimulate and diversify the economy (...) as part of Vision 2030," a comprehensive reform program led by the crown prince and de facto ruler of the kingdom, who also oversees the PIF, SPA affirmed.

It "will also strengthen the financial position and credit rating" of the fund, it added.

Aramco, the jewel of the Saudi economy, reported a net profit of $30.08 billion in the third quarter of 2023, after record profits of $161.1 billion in 2022.

In 2019, the listing of 1.7% of the shares of this oil giant had brought $29.4 billion to the kingdom.

The world's largest oil exporter relies on its oil revenues to finance an ambitious diversification strategy, of which the PIF is one of the main tools.

"The transfer of Aramco shares allows it to access more investment capital. This results in larger dividend payments, a stronger financial position, and more assets under management," said Robert Mogielnicki of the Arab Gulf States Institute in Washington.

"There is also a precedent for this transfer, making it easier to replicate," he added.

In Saudi Arabia, the PIF finances projects such as Neom, a futuristic $500 billion city under construction, which will include "The Line," parallel skyscrapers covered in mirrors stretching over 170 kilometers.

It is also behind Riyadh Air, an airline launched this year with the ambition to compete with Gulf giants like Emirates or Qatar Airways.

It has also made a name for itself in the world of sports, buying Newcastle United Football Club in 2021 and spending millions of dollars to attract global football stars like Cristiano Ronaldo to the kingdom.