China & Russia keen on taking up a large stake in Aramco IPO
The IPO of the world’s most profitable company certainly has big investors keen to own shares. While Saudi has a number of local investors, bankers are looking to attract international investors. The hot debate currently is simply on the price of the shares, as predictions announced have a large range — up to $1 trillion in many cases.
Nevertheless, Aramco’s IPO is attracting investors — especially from China — as the country looks to increase cooperation and partake in the profits from oil prices. Bloomberg has reported unnamed sources saying that China’s state-owned entities are considering investments between $5 billion and $10 billion cumulatively. One of them is Beijing-based Silk Road Fund.
Sinopec Group, China’s state-owned oil producer, and China Investment Corp., its sovereign wealth fund, were also reported to have been considering buying shares, as per Bloomberg’s report.
Of course, the final amount would depend upon their government’s approval, and nothing has been decided yet.
The investment would play a strong role in deepening relations between KSA and China, as well as make Amarco’s IPO a bigger success following previous hesitations from western investors on the Crown Prince’s insistence on the $2 trillion value mark of the oil giant. US government’s reaction to this is yet to be seen.
In mid-October, Russia’s head of the Russian Direct Investment Fund (RDIF), Kirill Dmitriev, told Reuters “Definitely Russia will not be making a huge investment in Aramco because already it is quite exposed to oil.”
However, as per new reports from Reuters, RDIF is looking to attract Chinese investors to invest in Aramco’s IPO. Kirill Dmitriev today told Reuters, “...we don’t expect massive investment from Russia because Russia already has a fairly serious oil and gas sector presence in its economy, and we need to diversify the economy.”
However, he added, “Nonetheless, we confirm that the Russia-China fund is working in this direction to attract a number of Chinese investors to the Aramco IPO.”
In October, Saudi Aramco signed 1 Share Purchase Agreement (SPA) and 9 Memorandums of Understanding (MoU) with Russian companies as part of Saudi Aramco’s upstream strategy. The companies include Gazprom Neft, Angara Service, Chelpipe, Galen, Integra, NKT, Technovek, PAO “TMK”, and Intratool; each of which signed one MoU with Saudi Aramco
We’re curious to see how the US government will react to these developments.