Saudi Arabia is trying to realign itself for the day when oil is not the linchpin of the world’s economy that it is now. So the nation’s crown prince aims to transfer 6% of oil giant Saudi Aramco to the kingdom’s sovereign wealth fund.
This amounts to shifting capital from one kingdom-controlled unit to another. The idea is to bolster the investment group, called the Public Investment Fund, to focus on pivoting the country away from its enormous dependence on fossil fuels. Crown Prince Mohammed bin Salman, also the country’s prime minister, has made clear in the past that Saudi Arabia needs to diversify. The Saudi government owned 90% of Aramco, as of yearend 2022.
This move follows one last year to shift 4% of Aramco shares to the PIF. Aramco has a market value of $1.9 trillion, which make it the world’s third most valuable company, following Apple ($2.6 trillion) and Microsoft ($2.1 trillion).
Because of Saudi Arabia’s oil orientation and the PIF’s stake in Aramco, the wealth fund stirred controversy last year by issuing $3 billion of what it calls “green bonds,” to be used in the kingdom’s transition to carbon neutrality by 2060.
The PIF’s strategy is to build up Saudi Arabia’s infrastructure, improving the likes of electricity production and public transit, and also to make the nation a tourist destination with ample leisure facilities. It plans to develop a $500 billion futuristic city in the desert, known as Neom, and build in the capital of Riyadh an entertainment venue, named Mukaab. Its assets under management, as of 2022’s first quarter, were listed at $620 billion.
The organization has equity positions in numerous businesses globally, including U.S. private equity titan Blackstone, Japanese investment firm SoftBank and the Russian Direct Investment Fund. It’s hard to tell what the PIF’s investing breakdown is by country, although it claims to have money in North America, Europe, Asia, Latin America and Africa.