The ongoing fight between the London Stock Exchange (LSE), New York (NYSE), Hong Kong and others are for sure not yet out of the running. Saudi officials have been able not to indicate any preference yet, but only keeping their cards close their chest. The last weeks several high-level attempts have been seen by parties to force the hand of Riyadh, without any real success yet.

London has now upped the ante by not only agreeing on a $2 billion loan for Aramco, but also by sending a City of London delegation, where London heavyweight companies are accompanying the Lord Mayor on his trip. Without any doubt, Charles Bowman, the City of London’s lord mayor, is going to discuss the Aramco listing during his meetings. Bowman will be assisted by an unknown senior executive of the London Stock Exchange (LSE) as well as representatives from PWC, and from investment group Standard Life Aberdeen. The delegation is officially to meet up with officials from the Saudi stock exchange—the domestic market on which Aramco will also list—and from Saudi Arabia’s sovereign wealth funds and monetary authority, according to British leading newspaper The Times. Even that members of the delegation all stated that the Aramco IPO listing is not the primary goal, no one is doubting that it will be. Last week, British PM Theresa May already went to Saudi Arabia, to meet up with King Salman and Crown Prince Mohammed bin Salman. She was more explicit by stating “London is extremely well-placed’’ to be picked as the listing venue.

At the beginning of November US President Donald Trump already openly stated in the press that he “would very much appreciate Saudi Arabia doing their IPO of Aramco with the New York Stock Exchange.” The latter is also still open, but US legislation and political issues are still considered to be a threat to the latter. The JASTA (Justice Against Sponsors of Terrorism) Act is currently threating law suits against all Saudi investments or assets in the USA. An Aramco listing could be considered to be a primary target by parties.

An outsider, as considered by analysts, Hong Kong has also pushed with full force the last week. High level Hong Kong officials have met Saudi Arabian King Salman in Riyadh. Media sources stated that Hong Kong chief executive Carrie Lam and financial secretary James Lau were joined by the chairman and the chief executive of HongKong Exchanges and Clearing (HKEx), CK Chow and Charles Li. Officially discussions have been focusing on several fields with the Saudi ministers of energy, finance and interior. Behind closed doors, the main focus will for sure have been the fact that HKEx’s Li has stated in the press that a Hong Kong listing would help secure huge Chinese demand for Aramco’s partial share sale, which Riyadh hopes will raise some $100 million. China is perceived as one of the main investors in the upcoming IPO schemes in Saudi Arabia. Aramco is a primary target, as it supports the Chinese demand for crude oil and petroleum products, but also will open up more opportunities for Chinese companies in Saudi Arabia.

One major partner is still keeping very quiet. No role has yet been decided for Russian institutional investors or the Moscow stock exchange. A possible listing in Moscow would be geopolitically and economically an interesting move for the Kingdom. It would not only open up direct links with the Kremlin and its backers, but also could mitigate a possible US-UK vs China power position on the listing battle. To have Moscow as a backup and strategic partner only would increase the position of Riyadh the coming year.

Riyadh’s plans for the Aramco IPO even got a boost already. The OPEC – non-OPEC deal, which has been struggling to get the international oil market again on track, seems now to be getting its hard-needed results. Khalid Al-Falih, Saudi Arabia’s energy minister, has accomplished his mission, coming back from OPEC’s meeting in Vienna, holding in his hands an agreement with Russia for around 9 month to continue the production cut agreement. The latter means that Aramco’s IPO will be put on the market in a framework of stabilized and possibly higher oil prices. Falih is now able to state to Saudi deal maker MBS that he can tick off another variable, oil price, that could have had a negative impact on the launch of the initial public offering of the world’s biggest oil company Aramco. It also will have shown the world community that the Saudi-Russian cooperation is still holding. If oil prices continue to hover around $60 or more per barrel, while global storage levels are being drained, the Kingdom could be expected a big surprise, an IPO which is oversubscribed at price levels not foreseen the last years. The revenues generated by the Aramco IPO will come at a time that, based on $60 per barrel, the Kingdom could be even running a current account surplus. The fiscal deficit will be lower than expected, easily to be managed by taking cash out of the international market via bonds. As the Bank of America Merrill Lynch already stated, $60 is a “Goldilocks” scenario for the Kingdom’s economy, helping the whole Saudi economy, as it is not forcing old habits to continue, but opening up roads for progress.

For the IPO, the current scenario is very promising. Looking at the market, and the strategic value of the IPO to institutional investors or governments (Russia, China, India, GCC), the success almost was guaranteed, even at price levels of around $40 per barrel. For the Kingdom it is however a political need to have Aramco valued at around $2 trillion, which is based on price levels of $55-60 per barrels in conservative assessments. The $2 trillion mark is strategic, as it is almost the same amount stated in several reports and Vision 2030 to be needed to diversify the Kingdom’s economy and set up around 6 million new jobs before 2030. The pot with gold is there, especially if OPEC is playing its part at the same time. Higher oil prices are good for the Kingdom’s short term revenues but could be a threat to the IPO in reality. With high oil prices, the need for an IPO is not anymore pressing. Saudi Arabia needs however the Aramco IPO, as it has gained the necessary interest of the global financial markets to finance its future plans. The Aramco IPO also is the first in a long line of Saudi IPOs to be expected. Without Aramco, the other companies will not be of real interest some fear.

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