Riyadh transfers 4% of Saudi Aramco shares to sovereign wealth fund

Mohammed bin Salman, Saudi Arabia's crown prince, has decided to transfer 4% of the shares of oil giant Saudi Aramco to the national investment fund, known as the Public Investment Fund (PIF). This small percentage represents almost $80 billion in cash that will go towards Saudi Arabia's plans to diversify the Kingdom's energy-dependent economy. 

Bin Salman explained that this decision is part of Riyadh's strategy to restructure the economy for the long term and diversify away from oil revenues. The crown prince concluded his statement by expressing his intention to continue implementing initiatives in line with the economic transformation plans and to provide more investment opportunities for development funds and the private sector, as well as to continue contributing to the goals set by the Saudi Vision 2030 project, according to SPA, the Saudi news agency.

"The FIP is Saudi Arabia's main vehicle for executing its 2030 vision, suggesting that this share transfer could involve more share sales in the future as a way of raising funds for the FIP to reinvest elsewhere," Yousef Husseini, associate director at EFG Hermes, told Reuters. 

Saudi Aramco, meanwhile, said the transfer was a private transaction between the government and PIF. "The company is not a party to the transfer and did not enter into any agreement and did not pay or receive any proceeds from the transfer," the company said in a statement. Also, this transaction will not affect the company's total issued shares, Saudi Aramco said. However, the Kingdom will remain the largest shareholder in the world's largest oil company, with more than 94 per cent of the total shares.

The PIF, in its drive to diversify the Saudi economy, has already launched more than 30 new companies and created 331,000 jobs in the Kingdom. The fund is focusing on various sectors to achieve its objectives, such as renewable energy, telecommunications, agriculture, transport and logistics, aerospace and defence.

In addition, the fund has investments in the US electric car company Lucid, Uber, Pinterest, Visa - the world's second largest card payment company - and Alibaba, the Chinese e-commerce company. The fund has also invested in the British football team Newcastle United. 

The PIF aims to spend 40 billion a year to develop the national economy until 2025. In addition, it aims to contribute $320 billion to the country's non-oil sectors of the economy.