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Russia, China Willing To Invest In Saudi Aramco’s IPO

Aramco

Russian banks and Chinese institutional investors would like to invest in the initial public offering of Saudi oil giant Aramco, the head of Russia’s state investment fund said on the sidelines of an energy event in Riyadh on Wednesday.  

“There are a number of investors who would like to invest in the Aramco IPO, including several banks,” Kirill Dmitriev, chief executive of the Russian Direct Investment Fund (RDIF), said, as quoted by Reuters.

“Not only this, we have a Russia-China investment fund, and through that Russia-China investment fund we see a major interest in the Aramco IPO from a number of leading Chinese institutions,” Dmitriev said.

Last month, the chief of the Russian fund said that Russian pension funds were considering taking part in Aramco’s IPO expected to take place in the second half of this year.

“We will see how the IPO process progresses but we see significant interest to invest in the Aramco IPO, from Russia, from China. We believe this is very good for, once again, thinking jointly about oil,” Dmitriev said today.

Saudi Arabia plans to sell 5 percent of its crown jewel Aramco in what would be the world’s largest IPO in history. Saudi officials have claimed that Aramco is worth US$2 trillion, so a 5-percent stake sale could fetch the Kingdom as much as US$100 billion.

Apart from potential investment in Aramco’s IPO, Russia is also considering multi-billion deals with the Saudi investment fund, including in projects and partnerships with Aramco, Dmitriev said.

Related: Saudi Arabia Vows To Cut More Production To Stabilize Oil Market

Back in 2015, RDIF and Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), announced a partnership to invest in projects in Russia, such that could strengthen trade, economic, and investment co-operation between the two countries.

Russia and Saudi Arabia have continued to boost economic ties, and oil ties as well, with the cooperation in the OPEC/non-OPEC production cut deal.

Last year, RDIF and PIF created the Russia-Saudi Investment Fund (RSIF) to pursue investment opportunities, primarily in Russia, and in joint ventures that can help Saudi Arabia’s economic diversification. The fund’s total committed capital is US$6 billion.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh G Salameh on February 14 2018 said:
    It is logical for both Russia and China to want to invest in the Initial Public Offering IPO) of Saudi Aramco.

    For Russia it is because cementing its strategic relations with Saudi Arabia is important economically and geopolitically. Cooperation between the two countries is essential for the stability of the global oil market and higher oil prices. A partnership already exists between the Russian Direct Investment Fund (RDIF) and the Saudi Public Investment Fund (PIF) to invest in Russian and Saudi oil and energy projects.

    For China, the success of its future crude oil futures contract which is expected to be launched on the 26th of March this year depends on the participation of Saudi Arabia and Russia who between them account for 23% of global oil production and 25% of oil exports. China’s interest in the IPO should be seen in that context.

    Russia is already on board. If Saudi Arabia wants to protect its share in China’s huge oil market, it might have to accept the petro-yuan in payments for its oil exports.

    Still, I think there is a possibility that the Saudis might decide to withdraw the IPO altogether. They may not need the IPO since their financial situation has improved significantly with the recent rise in oil prices.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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