Saudi Arabia has made a significant move by allocating a stake worth $163 billion from its national oil company, Aramco, to the country’s sovereign wealth fund, known as the Public Investment Fund (PIF). This action is part of a strategic effort to amplify the fund’s capacity to support initiatives aimed at rejuvenating the nation’s economy.
This latest allocation represents an 8 percent share of Aramco, marking the third instance within two years that the government has augmented PIF’s hold over the globally leading oil producer.
Following this transaction, PIF’s cumulative ownership in Aramco amounts to 16 percent. This expansion commenced with an initial 4 percent share transferred in February 2022 and was followed by another 4 percent acquisition by Sanabil, the investment subsidiary of PIF, in April 2023.
Crown Prince Mohammed bin Salman, known informally as MBS, who serves as both the prime minister and the chairperson of PIF, has been transforming the fund from a domestically focused conservative investor into a dynamic vehicle for the country’s investments under his ambitious Vision 2030 strategy. This plan is centered on modernizing Saudi Arabia and diminishing its dependency on oil revenues.
MBS stated that the share transfer will reinforce PIF’s robust financial health and creditworthiness. He underlined the move as a progression of the nation’s enduring plans to energize and diversify its economic framework, as well as to broaden investment horizons in alignment with the Saudi Vision 2030.
Aramco has labeled the share transfer as a ‘private transaction’ and assures that it will not affect the company’s operational approach, strategic direction, or its dividend distribution practices.
The monumental public offering of a 1.7 percent stake in Aramco took place in 2019 on the Saudi stock market, which generated approximately $29 billion. Post-transfer, the government’s direct holding in Aramco will decrease to 82 percent, as reported by the Saudi Press Agency.
With record-breaking profits of $161 billion in 2022, driven by high energy prices, Aramco’s quarterly dividend payouts continue to be a pivotal revenue source for the Saudi state. The company is slated to disclose its financial outcomes for 2023 shortly.
Prior to this stake transfer, PIF managed assets approximating $700 billion, with ambitions to oversee $1 trillion by 2025. The augmented stake in Aramco is set to supply the fund with considerable dividends, facilitating its strategic expansion.
The PIF has become a magnet for global investors, extending its reach from tech startups to sports entities, becoming a major investor in various sectors worldwide.
Yasir Al-Rumayyan, the governor of PIF who has emerged as a prominent non-royal figure within the kingdom, is entrusted with driving the fund’s growth. He also holds the position of chair at Aramco and Newcastle United, indicating the PIF’s prominent international investment profile.