Baker Institute expert: Saudi Aramco IPO ‘made many Saudis uncomfortable’


David Ruth

Jeff Falk

Baker Institute expert: Saudi Aramco IPO ‘made many Saudis uncomfortable’

HOUSTON — (Aug. 22, 2018) — Saudi Arabia has called off both the domestic and international stock listing of state oil giant Aramco, portrayed as the biggest such deal in history, senior industry sources told media today. There is probably some level of relief in Saudi Arabia that the state is backing away from the sell-off plan, according to an expert at Rice University’s Baker Institute for Public Policy.

Credit: University

Jim Krane, the Wallace S. Wilson Fellow for Energy Studies, is able to discuss the ramifications of this development for Saudi Aramco and global markets.

“The rationale behind the Saudi Aramco IPO remains sound: Raising capital to diversify the Saudi economy beyond oil,” Krane said. “Climate change has strengthened the impetus to diversify in recent years, forcing countries which export fossil fuels to begin developing new sectors. The hope is that, as the energy transition progresses, Saudi Arabia won’t be left behind.”

But the method chosen for the Saudi diversification — a sell-off of a 5 percent stake in Saudi Aramco — turned out to be flawed, Krane said.

“The IPO announcement brought heavy opposition from all sides in Saudi Arabia,” he said. “The public saw it as a misguided sell-off of the national patrimony. Aramco executives worried that the company’s vaunted autonomy and long-term planning would be sacrificed to meet short-term demands of shareholders. They and the Saudi government are worried that the additional reporting requirements of the SEC or the UK securities regulator might force the company to reveal more specifics about the size and composition of their oil reserves, which the Saudis are now able to maintain as a state secret.”

Krane said that the loss of this “strategic ambiguity” would mean that oil traders and others would enjoy more information about the Saudi reserves than they currently can access. “The Saudis would rather keep that information to themselves, which enhances their market power and the value of their market commentary and activity,” Krane said.

Saudi royals also feared the IPO’s transparency requirements would expose the monarchy’s internal workings, perhaps revealing details of the royal family’s financial stake, he said. “In short, the idea of a sell-off made many Saudis uncomfortable.”

Krane said those obstacles would’ve been surmountable if the Aramco IPO would have raised cash sufficient to value the company at $2 trillion or so, the level initially proffered by the Saudi Crown Prince Mohammed bin Salman. But when estimates of the likely valuations came in much lower, the rationale for an IPO became less convincing, he said.

“So there is probably some level of relief in Saudi Arabia that the state is backing away from the sell-off plan,” Krane said. “That said, there is still a strong argument for diversifying the oil-centric Saudi economy, and Aramco is likely to play a role in raising the capital for that process — directly or indirectly. If it’s not through a listing in London or New York, it may be through a private equity stake, through direct investments in new economic sectors within the kingdom or a listing of one or more of Aramco’s subsidiaries.”

Krane, a member of the Baker Institute’s Center for Energy Studies, specializes in energy geopolitics and energy consumption in Saudi Arabia and the Middle East.


For more information or to schedule an interview with Krane, contact Jeff Falk, associate director of national media relations at Rice, at or 713-348-6327. The Baker Institute has a radio and television studio available.

Related materials:

Krane bio:

Krane on Twitter: @jimkrane

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Founded in 1993, Rice University’s Baker Institute ranks among the top three university-affiliated think tanks in the world. As a premier nonpartisan think tank, the institute conducts research on domestic and foreign policy issues with the goal of bridging the gap between the theory and practice of public policy. The institute’s strong track record of achievement reflects the work of its endowed fellows, Rice University faculty scholars and staff, coupled with its outreach to the Rice student body through fellow-taught classes — including a public policy course — and student leadership and internship programs. Learn more about the institute at or on the institute’s blog,

About Jeff Falk

Jeff Falk is associate director of national media relations in Rice University's Office of Public Affairs.