Before the pandemic, Saudi Arabia had already decided that oil was not its great source of income for the future, given the fall in demand that the country was projecting and its replacement by other, cleaner sources of energy. The arrival of Covid has led to a 55% drop between 2018 and 2020 in the net profit of Aramco , the Saudi public company dedicated to the production of oil, which has seen the global demand for black gold plummet due to confinements in all the world.
Aramco cuts dividend
With this panorama on the table, Bin Salmán is being forced to act. The latest news about the new plans of the Saudi prince have been known during this month of April. One of the measures that the leader has adopted is to cut the dividend distributed by the state companies of Arabia. Aramco is an example, as is Sabic, a chemical company that is located in the most important strategic assets for the country. The idea of Bin Salmán is that these large Arab corporations use the payout that they are going to cut to invest the money locally, as explained by Bloomberg, an expense that will be allocated to new infrastructure and investment in technology.
This change in the project, however, has associated risks that some analysts are already highlighting. The first of them is that the income of the Saudi state will be reduced due to the fall in payout; after all, it is a trading card between the same owner. Only spending on salaries and pensions accounts for more than 130,000 million dollars, half of the public spending of the entire country, and was greatly offset by the dividend of Aramco, owned by 98% of the State, and which distributes a dividend of 75,000 million dollars, the largest on the planet.
The dividend cut is not the only project Bin Salmán is currently valuing for Aramco and the Saudi economy. Last week, Bloomberg published that the oil company is carrying out an analysis of its assets, with the intention of being able to put something on the market, giving entry to foreign investors in the country's oil and gas assets. It should be remembered that, although Aramco already went public in December 2019, only 1.5% of the capital was placed in the Saudi stock market, and of that portion only 23% ended up in the hands of foreign investors, as highlighted in 2019 Wassim al-Khatib, Head of Investments at the Saudi National Commercial Bank.
Now, Aramco would be contacting potential investors, according to internal company sources leaked to the agency, to try to sell some of these assets and have these funds available in the short term. Any agreement is yet to be closed, and these sales are not the only possibilities that are being handled: the oil giant would also be studying selling stakes in the operations of some specific fields, or other alternatives such as creating a joint venture with other companies in the sector.
Bin Salmán's project
Bin Salmán is a figure who represents, for some, a necessary and positive change for Saudi Arabia, having undertaken some important social reforms in the kingdom, such as the restriction of the powers of the country's religious police, or the end of the ban that prevented driving women, or an acceleration of their incorporation into the world of work. However, his mandate has also had a very dark part, such as the murder of journalist Jamal Khasoggi in 2018 at the Saudi consulate in Istanbul, which led to an international diplomatic crisis.
Bin Salmán is the eldest son of the current king, Salmán bin Abdulaziz, with his third wife. Known in Saudi Arabia as MBS, he is a millennial, having been born in 1985 in Jeddah, the second largest city in Arabia. He studied law at the King Saud University in the country, unlike other members of the royal house, who studied at Western universities.
After working for a time in the private sector, he became involved in politics at the age of 24, as an advisor to his father, who then ruled the province of Riyadh. Over time he grew politically until in 2014 he was appointed Minister of State. After going through various positions, in 2017 he was officially appointed crown prince.
