Saudi oil goes on the stock exchange, that's how the world will change

Only a few days would be missing for the announcement that the whole world has been waiting for years and that it would finally be about to be given. On Sunday 3 November, Saudi Arabia should communicate the timing and methods of the IPO of Aramco, the largest state oil company in the world.

According to some officials close to the dossier and who wished to remain anonymous with the foreign press, the Riad's listing on the Tawadul will take place for only 1-2% of the capital and with the aim of getting no less than 20 billions of dollars. It would be the biggest stock exchange ever, because the company would capitalize around 2,000 billion, almost twice as much as Apple, which at the moment values ​​Wall Street above 1,100 billion and is the largest listed company in the world of all time.And according to a flash news from Al-Arabiya, the subscriptions would start on December 4th, while the listing would take place on December 11th. A revolution that would put an end to years of postponements, doubts and uncertainties and would create the conditions for a distortion, albeit gradual, of the geopolitical, economic and financial relations on the planet. Aramco is not just any oil company, but there company par excellence with a daily production that before the Iranian attacks in mid-September continued to touch 10 million barrels a day, despite the self-restriction on the offer decided by the kingdom, in agreement with the rest of the OPEC and the Russia. In essence, it controls 10% of the world supply.

It has a maximum capacity of up to 12 million barrels per day and has reserves of 264 billion barrels. In 2018, it closed with a net profit of over 111 billion, the highest in the world, against a turnover of 356 billion. Managed with extreme efficiency, it is the hen with the golden eggs for Riad, because its tax revenue still contributes for more than half of the state revenues. And the proceeds of the IPO will be allocated to the diversification of the domestic economy, according to the guidelines revealed by Prince Mohammed bin Salman in April 2016 with the famous "Saudi Vision 2030", aimed at releasing the kingdom from dependence on oil within the end of the next decade.

Here are the impressive numbers of the Aramco IPO

IPO Aramco, end of OPEC?

Initially, the IPO aimed to list 5% of the capital on the stock exchange, yielding 100 billion at the time. The downsizing of the plans, not of the expected capitalization, is due to the difficulties encountered in absorbing such large amounts of capital, in addition to being linked to the purchase of an extremely minority share of the company, which would remain largely controlled by the state. However, landing on the stock exchange also means that Aramco will have to report to private individuals of its decisions on production and price fixing, gradually disengaging them from geopolitical reasoning.

In essence, Aramco will increasingly have to respond to the market and less and less to the OPEC allies on supply levels, a fact that risks overwhelming the oil cartel and rendering it useless, having been created about half a century ago with the aim of coordinate the actions of member states on the crude oil market. The Saudis signal two things with the IPO: they aim to diversify domestic production and the same sources for state revenues, obtaining with the partial privatization huge resources for the purpose; that they will be more "market oriented" in their decisions, that is, they will be able and must take less and less into account the requests of the partners, especially those most in financial difficulties, such as Venezuela, Nigeria, the hated Iran and Libya.

Aramco's IPO will mark the end of OPEC, that's why

Who will enter the capital Aramco? There is talk of the Russian sovereign fund for direct investments, above all. And this in itself represents shocking news for the geopolitical balance, because the Saudis are close allies of the USA, who certainly do not look favorably on the alliance of these with the Russians, especially in such an influential sector as that energy. See in this regard the grievances via Twitter of Donald Trump in the past months, with a lot of explicit threats to the Saud monarchy to abandon it militarily to its destiny.

Nothing will be like before after the IPO. And it is not an exaggeration, but the taking of an epochal change. In September, an Iranian attack via drone was enough against the Saudi site of Abqaiq to provoke a surge, albeit temporary, of international oil prices of 20%.

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