Saudi Arabia's Prince Mohammed is Selling Prized Stake in Aramco; Chinese are Preferred Buyers

China's sovereign wealth fund China Investment Corporation (CIC) is in talks to buy stake in Saudi Arabia's state-owned oil company Aramco, reports have said.

The report comes after Riyadh said it was selling 1 percent stake in the world's largest oil company. Apart from CIC, other Chinese investors are also in talks to buy a stake in Saudi Aramco, Reuters reported. Saudi Arabia is the world's biggest oil exporter and this gives unmatched heft to Saudi Aramco, making it a prized destination for global investors.

Aramco's initial public offering in 2019 had raised $25.6 billion while further share sale under "greenshoe option" brought in an additional $29.4 billion.

Saudi Aramco
Saudi Aramco YouTube Grab

Saudi Arabia's de facto ruler Mohammad bin Salman (MbS) said this week that the kingdom is likely to offer more than the 1 percent stake it had opened up earlier. MbS said the global energy behemoth would sell further shares including to international investors in the year ahead.

"There are talks now for the acquisition of a 1% stake by a leading global energy company in an important deal that would boost Aramco's sales in ... a major country," Prince Mohammed bin Salman had said. He also mentioned that more stake could be sold to different investors and that talks have been going on.

"There are talks with other companies for different stakes, and part of Aramco's shares could be transferred to the (Saudi) Public Investment Fund and a part listed ... on the Saudi bourse," he added in an interview aired by Saudi TV.

The miniscule 1 percent stake in Saudi Aramco is worth around $19 billion, Reuters reported, based on the current market capitalisation of the Saudi state oil company.

Other Chinese organizations are also in talks with Aramco. The Saudi major has been in talks with Chinese investors for a few years, a source told the news agency. "The kingdom does have close relations with China ... The major shareholder will decide what to do with their shares."

Why China?

MbS, the powerful crown prince who has maintained an iron grip on the kingdom ever since his father King Salman took the throne, said China was an important element in the kingdom's foreign policy. He said China, India and Russia are important foreign partners, while the United States was the key strategic partner.

"China has said Saudi Arabia is a strategic partner, India has said Saudi Arabia is a strategic partner and Russia has also said Saudi Arabia is a strategic partner," the prince said.