The Kingdom of Saudi Arabia has announced that it seeks to consider offloading 1% of Saudi Aramco’s share to potential buyers. Currently it has been speculated the country is eyeing China as a potential buyer. The question is why?
Desperate times, desperate measures. Those words are the perfect description applying to Saudi Arabia’s current predicament. Not only the Kingdom is facing a diplomatic breakdown, it has now to deal with the Houthis repeated attacks on their most precious investment, Saudi Aramco. For a country that relies so much on its petrol products to keep the gears of its economy churning, Saudi Arabia has taken some drastic measures as of late.
It has been reported that the Kingdom of Saudi Arabia is considering selling some of Saudi Aramco’s share to foreign entities, including sovereign countries. Though no entity has been confirmed as of late, speculations and rumours indicate that the People Republic of China is seriously being considered as a top contender in the race which is about to come. Saudi Crown Prince Mohammed bin Salman himself hinted at the possibility, implying that the country is willing to put up to one percent of Aramco’s stake for sale. Based on the estimates, it is calculated that the one percent share alone would be worth more than 19$ billion.
As to why China might be interested in acquiring Saudi Aramco’s share, there are quite a number of reasons. For starters, it might have something to do with the fact that China is currently the largest buyer of Saudi Arabia’s crude oil. China alone accounts for the majority of the company’s sales and its value for the country is more so than the whole sum of some other countries combined. Secondly, China is heavily dependent on crude oil for its energy security. It is only natural for such a voracious player to have a stable investment it can dip into whenever it desires. Third, China is possibly one of the few countries with the economic potential to make that purchase at such a time actually. Pandemic did a number on the world’s economy but if there was any player capable of successfully repelling the economic downturn, it was China.
More exciting than China’s interest in buying the Saudi Aramco’s share is Saudi Arabia’s interest in selling its share to China however. We can look at this from two perspectives: Economic and political. Economically speaking, China or any other Asian buyers such as Southeast Asian countries, India, Japan or even South Korea would be enough to fulfil bin-Salman’s vision for his country. Mohammad bin-Salman had previously expressed interest in liberating the country’s dependency on oil and that funding necessarily doesn’t have to solely come from China. Politically speaking however, China turning into a stakeholder in Aramco would be the country’s best bet for deterring the country’s enemy, most notably Yemen’s Houthi Movement, from targeting Aramco’s assets. Given the fact that the Houthi movement relies on help from Islamic Republic of Iran, it is only natural for Saudis to want to involve a strategic partner of Iran in the game, especially one who has recently formed an important partnership with the Houthis main patron.
At any rate it appears at the moment that for the first time in history, the oil market is bound for some reckoning one way or another. For all we know, thanks to the improvement of shale production, not so many countries are interested in crude oil as they were before. Furthermore, there have been numerous attempts by Western nations like US and European countries to replace fossil fuels with renewable energies and that would mean less demand for oil and the rest of petrol products. That would obviously put the future of countries like Saudi Arabia at stake and that is only if there are no other threats from the outside world. Thereby to secure that investment, Saudi Arabia is willing to go to any length, even if it means selling its shares to establish a stable outcome for the time being.