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Saudis fear Aramco flotation amounts to selling the cash cow

Saudis often liken Aramco, the kingdom’s state oil company, to a fat cow or productive hen.

The company has for decades been the bedrock of the economy and the enabler of the government largesse to which Saudis have grown accustomed. Now its future has become a source of concern as disquiet grows over plans by Mohammed bin Salman, the deputy crown prince, to sell a 5 per cent stake in Aramco.

In recent weeks the hashtag “Mohammed has sold the chicken” has been trending on Twitter, as social media has become the platform for an outpouring of discontent.

“What showered us in riches and goods has been sold,” said one anonymous post. “What is left for us apart from the unknown, oh Prince? Of course, for us the unknown and the future for you.”

The criticism of Prince Mohammed and his plans underlines the challenges the powerful young leader faces as he tries to push through bold reforms intended to overhaul Saudi Arabia’s oil-dependent economy. The initial public offering of Aramco, which would be the world’s biggest IPO, is core to his plans. He hopes to raise $100bn through the sale, which is supposed to take place in 2018.

But resistance to his plans, which include painful austerity measures as Riyadh tries to narrow a yawning fiscal deficit and counter the impact of low oil prices, is simmering. This month, the government reversed cuts to civil servants’ benefits, a surprising U-turn in the face of public pressure that included petitions and an online call for street protests.

Days later, Prince Mohammed addressed the grumblings over the Aramco IPO, insisting the sale would not be derailed and saying it was crucial to the kingdom’s economic diversification efforts.

Critics of the IPO were engaging in “socialist, communist thinking”, he said in an interview with Saudi television.

“The amount of money we will make through Aramco will help us seize many opportunities,” he added.

Mohammed bin Salman, Saudi Arabia’s deputy crown prince © AP

Many Saudis do support his reform plans as they recognise the need to tackle a fiscal crisis triggered by the oil price slump. But the Aramco IPO is particularly sensitive. Oil is regarded by many as a birthright: the foundation of national wealth and a guarantor of future generations’ wellbeing.

Saudi oil reserves, initially exploited by US companies, were gradually taken under national ownership in the 1980s. Older Saudis remember the challenge of taking control of their prized asset and now wonder why Riyadh would reverse that accomplishment.

The genesis of the rebellious hashtag criticising the proposed sale appeared to be a comment from Othman al-Khowaiter, a former Aramco vice-president, who is one of the few prominent voices to criticise the planned IPO publicly.

“Aramco is the hen that lays golden eggs,” he tweeted in March, describing privatisation as a tool best used when dealing with lossmaking enterprises. “It is unacceptable to compromise any part of it under any circumstances.”

Few Saudi dare to speak out publicly for fear of appearing opposed to Prince Mohammed’s “Vision 2030” programme. But a Riyadh-based corporate lawyer said “the majority of the people I know are against the sale”.

“Some of them have a business case against it but many are simply against what they see as selling what they consider ‘rightly ours’,” he added.

Barjas Albarjas, an economic commentator, says Saudis’ anxiety over the IPO is overstated, adding that people’s concerns would dissipate once feasibility studies are completed.

“Humans by nature are negative to change, especially the ones who are used to being fed by their sugar daddy,” Mr Albarjas said.

Prince Mohammed is staking his credibility as a future king on transforming the economy into a private-sector-led growth engine hinging on sectors such as mining, manufacturing and tourism.

But the discontent with the planned IPO reveals many hurdles he faces along the way.

“You know what they say about Vision 2030 — they give us 20 but take back 30,” quipped one junior state employee.

Via FT