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Why Saudi Arabia Transfered 4% of Aramco Shares to PIF Subsidiary?

Saudi Arabia continues its efforts to diversify its sources of income and utilize its capabilities to push forward its economic growth plans (Asharq Al-Awsat)
Saudi Arabia continues its efforts to diversify its sources of income and utilize its capabilities to push forward its economic growth plans (Asharq Al-Awsat)
    Riyadh – Mohammed al-Mutairi
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Why Saudi Arabia Transfered 4% of Aramco Shares to PIF Subsidiary?

Saudi Arabia continues its efforts to diversify its sources of income and utilize its capabilities to push forward its economic growth plans (Asharq Al-Awsat)
Saudi Arabia continues its efforts to diversify its sources of income and utilize its capabilities to push forward its economic growth plans (Asharq Al-Awsat)

Saudi Arabia's Crown Prince Mohammed bin Salman announced Sunday the transfer of a 4% stake of the oil giant Saudi Aramco to Sanabil Investments, a subsidiary of the kingdom's Public Investment Fund (PIF).

Experts interviewed by Asharq Al-Awsat said the move supports PIF’s flexibility in capturing local and global investment and strategic economic opportunities, as well as ensures the continuation of plans to drive national economic growth.

Crown Prince Mohammed bin Salman indicated that the transfer of part of the State’s shares in Saudi Aramco is a continuation of Saudi Arabia’s long-term initiatives to boost and diversify the national economy and expand investment opportunities in line with Saudi Vision 2030.

The transfer will also solidify PIF’s strong financial position and credit rating. The Crown Prince also pointed out that the State will remain Saudi Aramco's largest shareholder following the transfer, with total ownership of (90.18%) of the company’s shares.

He concluded that PIF continues with its mandate to launch new sectors, build new strategic partnerships, localize technologies and knowledge, and create more direct and indirect job opportunities in the local market.

Mohammed bin Dleim Al-Qahtani, a professor of economics at King Faisal University, said that PIF operates with high intelligence and flexibility in all economic and investment directions, while maintaining its financial position and global levels.

PIF aligns itself with the aspirations, ambitions, and plans of the Saudi Crown Prince to quickly seize investment and strategic opportunities, according to the new Saudi leadership theory that prioritizes economic logic and momentary leadership, explained Al-Qahtani.

He added that this step will strengthen the Saudi economy and its growth, making it a flourishing emerging economy and a role model for surrounding economies.

It will also contribute to circulating funds within the Saudi economy, resulting in the creation of new jobs, improved services, enhanced private sector position and competitiveness, and an opportunity to restructure and seize investment opportunities.

For his part, financial analyst Hamad Al-Alyan stated that the decision comes amidst Saudi Arabia's economic and developmental progress, as well as its increased investment activity, driven by Vision 2030 and its efforts to expand the government’s sources of revenue and pursue investment and developmental opportunities in the region.

This step will be a good opportunity to reduce reliance on oil as a primary source of income and attempt to diversify the Saudi economy’s revenues through many existing and upcoming mega-projects, Al-Alyan told Asharq Al-Awsat.

He predicted Saudi Arabia’s GDP doubling within the next two years.

Saudi Arabia may achieve the Vision 2030 targets before the deadline due to the continuous growth rates of the Saudi economy and the recently recorded positive upward trends, explained Al-Alyan.

Al-Alyan confirmed that the share transfer process will play a vital role in increasing PIF’s assets and maximizing its investment returns.

The transfer will also enhance the fund’s financial position and direct it towards investing in new and sustainable sectors, building strategic economic partnerships, and contributing to the GDP and generating direct and indirect job opportunities in the Saudi labor market.

It should be noted that Sanabil Investments is actively seeking promising opportunities to support its growth and success journey, with a focus on early-stage businesses, specifically investing in high-risk capital categories, growth strategies, and small acquisition deals.

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China Carefully Assembling a Deep-sea Mining Strategy

So-called polymetallic nodules like those seen in this 2016 photograph from Japan are at the heart of the race to mine ocean floors for valuable minerals and metals. HO / JAMSTEC/AFP
So-called polymetallic nodules like those seen in this 2016 photograph from Japan are at the heart of the race to mine ocean floors for valuable minerals and metals. HO / JAMSTEC/AFP
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China Carefully Assembling a Deep-sea Mining Strategy

So-called polymetallic nodules like those seen in this 2016 photograph from Japan are at the heart of the race to mine ocean floors for valuable minerals and metals. HO / JAMSTEC/AFP
So-called polymetallic nodules like those seen in this 2016 photograph from Japan are at the heart of the race to mine ocean floors for valuable minerals and metals. HO / JAMSTEC/AFP

In a world hungry for crucial resources, China may not be poised to start deep-sea mining but it is planting seeds for such operations in a meticulously planned economic and geopolitical strategy.

The world's oceans, both international waters and those under national jurisdiction, are rich in minerals and metals, like cobalt, nickel and copper.

These are important for building electric car batteries, for instance, and other technologies as countries try to transition away from fossil fuels.

China "is an energy-thirsty country. It will look for resources everywhere," including the deep sea, said Julia Xue of Shanghai Jiao Tong University.

But she said China is not particularly anxious over the issue, although recent developments -- one company is itching to be the first to start mining the sea bed -- may put more pressure on Beijing.

A Canadian firm, The Metals Company, has filed an application with the United States to begin undersea mining in international waters.

Using its American subsidiary, it acted after President Donald Trump, bypassing international negotiations, signed an executive order in April to speed up the permit-issuing process for such mining in US and international waters.

Trump cited an obscure 1980 US law that says American citizens can explore for and recover deep sea minerals in areas beyond the country's jurisdiction.

Environmental groups are outraged by Trump's order, arguing that a wild hunt for the potato-sized, metal-containing nodules could harm fragile undersea ecosystems.

The Canadian company initially said it would submit its request to the International Seabed Authority (ISA), a body which has jurisdiction over the ocean floor in international waters.

The Metals Company says it ignored this authority because of its slow pace in talks on adopting a mining code that establishes rules for exploiting seabed resources. The United States is not an ISA member.

A long-time observer of those talks who spoke on condition of anonymity said China is not particularly worried about who starts mining first.

"For them it's more about dominance, staying competitive in the game, and giving the impression that you can't mess with us," the observer said.

With that goal in mind "they're definitely developing the technology and putting the strategic agreements in place," Alex Gilbert, a researcher at the Payne Institute for Public Policy at Colorado School of Mines, told AFP.

For instance, China has reached an agreement with the Cook Islands to explore for minerals in that Pacific country's waters.

Another tiny Pacific nation, Kiribati, also says it is exploring a deep-sea mining partnership with China.

This approach is "more geopolitical than economic," said Emmanuel Hache of the French Institute for International and Strategic Affairs, noting Beijing is using undersea mining as a lure to cement greater diplomatic support as it exerts power.

China holds five contracts handed out by the ISA to look for resources in the Pacific and Indian Ocean sea beds and these contracts cover all types of undersea mineral resources. China's is the largest number of the 22 contracts the organization has granted.

Years behind

"From a research perspective, we have been continuously getting closer. And from a technical perspective, we have been continuously improving," said Chen Xuguang, a researcher at Ocean University of China.

In 2024 a Chinese prototype deep-sea mining vehicle called Pioneer II, developed by Shanghai Jiao Tong University, set a national record by operating at a depth of more than 4,000 meters (13,100 feet).

State-owned Beijing Pioneer Hi-Tech Development Corporation told AFP that later this year it plans a seabed nodule collection test.

Still, China is not as advanced technologically as The Metals Company, experts say.

"I would characterize China as being two to four years behind them in terms of their technology," said Gilbert in Colorado.

Hache, the French expert, put the gap at five years.

But China has an advantage over firms like the Canadian one in recovering and processing nodules: its companies are supported by the state and China has infrastructure for processing metals.

The observer of the international seabed talks said China does not need seabed mining for metal supply, "but maybe geopolitically, in the context of maintaining their control over the commodities market."

China wants to keep its options open, this person said.

And while it supports an international mining code, China does not need one now and "they're not going to put pressure until they've decided strategically that they're ready," said Gilbert.