Saudi Arabia boosts sovereign fund with 4% Aramco transfer

Saudi Arabia’s government transferred a 4% stake in Saudi Aramco to its sovereign wealth fund-owned Sanabil Investments as part of its economic growth strategy.

The government remains Saudi Aramco’s biggest shareholder with 90.18% of the oil company, according to state-owned Saudi Press Agency.

What happened: Saudi Arabia’s Crown Prince Mohammed bin Salman announced the completion of a 4% transfer of Saudi Aramco shares on Sunday from state ownership to Sanabil Investments. The value of the transfer is estimated at $77.8 billion, according to Bloomberg calculations that used Aramco’s market valuation of more than $1.9 trillion.

Sanabil is an investment arm of the Public Investment Fund (PIF). It commits about $3 billion in capital per year in private investments, according to the financial investment company’s website. The government transferred about the same percentage last year.

In 2019, the kingdom sold nearly 2% of Saudi Aramco in an initial public offering.

Why it matters: The move is part of a greater goal to reduce the kingdom’s dependance on oil by expanding and modernizing the kingdom’s economy by developing its non-oil sectors and industries as part of Saudi Vision 2030, which launched about seven years ago.

According to the crown prince’s statement, the transfer of ownership will support the kingdom’s initiatives to strengthen the national economy by diversifying its resources and expanding investment opportunities.

Yasir al-Rumayyan, governor of the PIF, has been tasked with spearheading its expansion, reported the Financial Times. Rumayyan also chairs Saudi Aramco and Newcastle United football club, a high-profile PIF investment.

Saudi Arabia opened four special economic zones on Friday to further attract foreign direct investment, which decreased by nearly 60% from 2021 to 2022, according to Forbes. Vision 2030 aims to increase its contribution to gross domestic product from 0.7% in 2016 to 5.7% by 2030.