DUBAI, United Arab Emirates -- Saudi Arabia's renewed push to publicly list its most valuable asset, Aramco, is part of a high-stakes masterplan by Crown Prince Mohammed bin Salman to overhaul the economy and prepare the country for a future less dependent on oil for survival.
In a step toward a potential initial public offering, the state-owned company this week moved to distance itself from the government by replacing Saudi Energy Minister Khalid al-Falih as board chairman with the finance-minded Yasir al-Rumayyan, who heads the Public Investment Fund, or PIF, the country's sovereign wealth fund.
Al-Falih was formerly Aramco's CEO before becoming its chairman and Saudi energy minister. His successor as chairman is not an old hand in oil.
Al-Rumayyan is, however, a close adviser to the crown prince and has led the PIF's eye-catching investments, some of it backed by loans, in U.S. tech startups like Uber and electric carmaker Lucid Motors, and joint ventures with Japan's technology giant SoftBank and U.S. private equity firm Blackstone.
If Aramco is preparing for an IPO as soon as 2020 or 2021, as Saudi officials have said, removing al-Falih as chairman helps give an appearance of a separation between the government and the operations of Aramco as a company that makes its own decisions based on business conditions, analysts said.
"The blurred lines have always been a source of confusion for investors, and the relationship between the state and the company has always been murky," says Ayham Kamel, analyst at Eurasia Group.
Installing al-Rumayyan as chairman, though, has raised questions about whether decisions will be made for the long-term health of the company or based on what's best for the needs of the PIF, said Ellen Wald, president of Transversal Consulting.
Wald said there's also concern because he's made some very risky investments as head of the PIF in ways that resemble a venture capitalist fund looking for speculative gains rather than a sovereign wealth fund aiming to grow a nation's riches sustainably.
"That doesn't necessarily bode well for Aramco, which is a different kind of company. It has to make stable decisions for the long term," she said.
"Saudi Arabia depends on Aramco for its wealth, and the monarchy depends on that wealth for its power," added Wald, who's the author of "Saudi Inc." about Aramco's corporate history.
Just months before becoming chairman, al-Rumayyan— while serving on Aramco's board— helped engineer the company's acquisition of a $69 billion stake in Saudi petrochemicals firm Sabic from the PIF, helping pump capital into the fund.
Robin Mills, CEO of Dubai-based energy consulting firm Qamar Energy, said that while the deal boosts Aramco's downstream portfolio, the company wasn't too keen on the price they were presented with by al-Rumayyan.
"If he's chairman of Aramco and there's a future deal like that, then he's on both sides of the table," Mills said.
Despite these concerns, there's huge buzz around Aramco's IPO.
The company disclosed recently that it made $356 billion in revenue last year, yielding profits of $111 billion, making it by far the world's most profitable enterprise.
An Aramco share listing would also be the world's largest ever.
The crown prince has claimed a valuation of at least $2 trillion, though most analysts put it closer to $1.5 trillion. Even at that lower end, a 5% listing would amount to some $75 billion, about enough to finance the Saudi budget deficit for two years, according to research firm Capital Economics.
In other words, the Aramco IPO— while massive in size— is only part of a sweeping overhaul needed to reform the kingdom's oil-driven economy.
"The economy is as dependent on oil as it was four, five years ago," said Jason Tuvey, Mideast economist at Capital Economics. "Investors still aren't buying into the picture that Mohammed bin Salman is trying to paint of the future of the Saudi economy."
Brent crude oil is trading at around $58 a barrel, well below the $80 to $85 a barrel that analysts say is needed to balance the Saudi budget. Meanwhile, government spending is higher than ever at $295 billion this year, buoyed in part by the introduction of some taxes to create new revenue streams.
The Saudi government pays the wages of most Saudis and its projects fuel the economy. For the 34-year-old crown prince to succeed in diversifying the economy, analysts say he will need a vibrant private sector to create jobs for many of the 10 million Saudis, roughly half of the Saudi population, who are under 35 and of his generation.
Already, some of the prince's ambitious targets have been adjusted or scrapped since he first unveiled his Vision 2030 for the country. Plans to boost the proportion of Saudi women in the workforce were recently lowered from the initial 30% goal line to 24% by next year.
While funneling Aramco funds to the PIF could help provide funding to jumpstart new industries and spur job growth, it could also crowd out private industry and investment.
"There's going to need to be a lot of wisdom on how that money is funneled back into the economy," said Samantha Gross, fellow of the Cross-Brookings Initiative on Energy and Climate.
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