Saudi Arabia is planning to establish a $2tn (£1.4tn) sovereign wealth fund by selling off its state petroleum assets in preparation for a world beyond oil.
Greenpeace said it was a pivotal moment akin to Switzerland abandoning banking, but others claimed Riyadh had long wanted to diversify its economy and spread its wealth though it had failed to do so.
If the fund was built up to $2tn, it would be more than double Norway’s sovereign wealth fund, regarded as the largest in the world by assets.
The move was revealed by the country’s powerful deputy crown prince, Mohammad bin Salman, and would mean the desert kingdom using its public investment fund (PIF) to buy up strategic financial and industrial assets abroad.
Some will see the move as a highly symbolic shift away from fossil fuels for a country most associated in the public eye with oil, but critics question whether it is more about style than substance.
The sale of a first tranche of shares to private investors via an initial public offering (IPO) in the state-owned Saudi Aramco could start as soon as next year, with the eventual aim of being big enough to potentially buy some of the world’s largest companies such as Apple and Google’s parent, Alphabet. “IPOing Aramco and transferring its shares to PIF will technically make investments the source of Saudi government revenue, not oil,” the 30-year-old son of King Salman said in an interview with Bloomberg in Riyadh.
“What is left now is to diversify investments, so within 20 years we will be an economy or state that doesn’t depend mainly on oil.”
Saudi Arabia already has a PIF, but it remains small and currently has only 5% of its holdings abroad. Last July it spent $1.1bn on a 38% stake in South Korea’s Posco Engineering and signed off a $10bn deal in Russia.
Plans to allow foreign investors to buy shares in Saudi Aramco, the holder of the country’s oil wealth, were first revealed in January. Analysts have struggled to put a value on the entire business, but say it could be worth anything from $1tn to $10tn, the former being the combined value of Apple and Alphabet.
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