Saudi Aramco IPO: China Weighs in to Expand Political Muscle

In the sale of a 2% stake through IPO, Saudi oil giant Aramco is in talks with China for a $10 bn investment. Providing the throttle for the IPO, China has beneficial stakes in ‘One Belt, One Road’ initiative and increasing oil prices, creating a win-win situation for both the countries.

Crux of the Matter
  • Amidst the Aramco valuation issues – Crown Prince estimates it to be $2 trillion – the IPO selling company’s 2% stake will come out at the end of 2019.
  • China’s Sinopec Group, China Investment Corp., Silk Road Fund, and other investors in talks with Aramco to acquire $5 – $10 bn stake in the IPO.
  • Aramco also reached out to Malaysia’s Petronas, offering them participation in the IPO.
  • The triangular situation created from the Aramco-Reliance deal and China-Aramco is yet to provide a clear image of the impact on India-Saudi-China ties.

Silk Road Economic Belt – Xi Jinping visited Astana, Kazakhstan, and Southeast Asia in September and October 2013, and proposed jointly building a new economic area, the Silk Road Economic Belt. Essentially, the “belt” includes countries situated on the original Silk Road through Central Asia, West Asia, the Middle East, and Europe. The initiative would create a cohesive economic area by building both hard infrastructure such as rail and road links and soft infrastructure such as the trade agreements and a common commercial legal structure with a court system to police the agreements. Read More.