Pouring oil on troubled waters in Saudi Arabia

Saudi Arabia's decision toshelve the listing of the 's national oil company Aramco on domestic and global share markets could lead to regime change in the kingdom.

Senior princes and establishment figures could demand that King Salman, the ultimate authority, curb the wide powers of his son, crown prince Mohammed, or agree to his replacement by a consensus royal, regional experts predict.

The initial public offering (IPO) was for $100 billion (€85.75 billion) in shares, representing 5 per cent of Saudi Aramco’s valuation, estimated at $2 trillion (€1.715 trillion). The listing had been touted as the centrepiece of the kingdom’s efforts to reform under a plan, Vision 2030, designed by the 32-year-old prince, who is also known as MBS.

The king held intensive consultations with bankers, oil executives and family members who recommended this course of action. The main reason for cancellation is concern that market listings would require full financial transparency for a Saudi government-owned corporation known for opacity. It is also feared Aramco’s worth could be halved to $1 trillion (€857.9 billion).

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This is the third time the king intervened this year to correct a domestic policy adopted by MBS

Last week Saudi energy minister Khalid al-Falih, an MBS appointee, denied a Reuters report that the listing had been cancelled and said the government would announce the IPO at an unspecified date in the future. His intervention has been dismissed by well-sourced reports from Riyadh.

Cancellation of the listing is a major blow to the prince’s drive to shift from the kingdom’s dependence on oil, which provides 90 per cent of revenues, and develop the non-oil and private sectors. Funds raised by the IPO and further share offers were meant to fund Vision 2030.

Intervened

This is the third time the king intervened this year to correct a domestic policy adopted by MBS, who holds the defence portfolio and is economic tsar, head of the royal court, and foreign policy chief.

In January, MBS cut government benefits to Saudi citizens while doubling fuel prices and introducing VAT. The king intervened when Saudis, particularly the young generation, protested on social media. To offset rising prices, he reinstated payments for a year, to the tune of $13.3 billion (€11.4 billion), for government servants and the military, which make up two-thirds of employed Saudis.

The king intervened a second time by torpedoing Trump administration efforts, said to be supported by MBS, to resolve the Arab-Israeli conflict by dictating a plan acceptable to Israel but not the Palestinians. The king rejected US recognition of Jerusalem as Israel's capital and renewed the kingdom's support for the emergence of a Palestinian state alongside Israel.

Since his father became king in early 2015, MBS has made powerful enemies. He consolidated power in his branch of the ruling family by ousting two cousins from other branches who had been appointed crown prince ahead of him.

Liberal dissidents

He jailed liberal dissidents and ultra-conservative clerics and detained and confiscated fortunes of 11 princes, 40 former ministers and scores of businessmen and media moguls. Among those held and fleeced were Prince Miteb bin Abdullah, son of the late king and ex-commander of the 100,000-strong national guard, and Prince Alwaleed bin Talal, the richest man in the kingdom.

MBS is also widely castigated for regional overreach. In March 2015, he provided arms and money to jihadis in Syria, prolonging a war the government is winning. His brutal war in Yemen has cost $200 billion (€171.4 billion) so far and led to accusations of war crimes.

In 2017, MBS and his Abu Dhabi counterpart Mohammed bin Zayed instituted a siege and blockade of Qatar, dividing the six-member Gulf Co-operation Council. So far, the king (81) has not intervened in his son's regional misadventures but he may be forced to act sooner rather than later.