Forget the buzz around Saudi Aramco’s initial public offering (IPO), which looks set for 2018. Saudi Crown Prince Mohammad bin Salman (aka MBS) has been on a PR campaign to plant the seeds of a $2 trillion valuation. Other, more sober estimates put the figure at $1 trillion. Whatever the number, consider that ExxonMobil’s market capitalization is $353 billion;1 Saudi Aramco is three to six times that size. The game plan is to sell 5% of Saudi Aramco’s equity, most likely in New York or London. This is a big deal.
Time for some “Kremlinology”2 on Riyadh. As if there wasn’t enough “Riyadhology,” MBS shook the tree in November, with billionaire Prince Al-Waleed bin Talal being just one of many arrested on corruption charges. MBS may be wise in his 32 years; throwing the book at the top of the house for corruption is his signal to whomever is going to pony up the $500 billion for Saudi Vision 2030 that he means business. What’s Saudi Vision 2030? That’s the massive infrastructure and modernization program that is the Saudi equivalent of China’s Silk Road Initiative, complete with Star Trek-like visions of a Saudi Arabian future that is distinctly 21st century.
What’s promising about the anti-corruption actions is that the market’s reaction is essentially diametrically opposed to ours; we view it as a net positive, as MBS seeks to modernize by crushing opposition, the same opposition that spent decades thrusting radical Wahhabism on the populace. The consensus sees this power grab as something that throws the Saudi Arabian status quo into disarray. Quite the contrary; we believe the country desperately needs someone like MBS to make the kingdom a peaceful participant in this century’s future, in sharp contrast to its status as a hostile actor in the previous decades.
With President Donald Trump making loving overtures toward the Saudi royal family, maybe New York is the odds-on favorite for the listing, not London. Either way, remember that it is accepted among Middle East followers that Saudi Arabia’s harrowing embargoes on Qatar, also a Sunni-ruled monarchy, only came after Trump gave his blessing. Those sanctions came after Saudi Arabia and other gulf nations accused Qatar of funding ISIS, so it is heartening that the regional power broker may be putting its foot down on international terrorism.
