4 ms·

This seems like a textbook case of "governmental risk". Very specifically, whenever the Saudi monarchy falls, Saudi Aramco is likely to be worth literally noth

• oh_sigh 10y ago
  Likewise, would the Saudi government ever let Saudi Aramco fail, or even lose a lot of its 'value'?
  • kogepathic 10y ago
    > or even lose a lot of its 'value'? Yes? I mean, unless they're planning to run a pyramid scheme, by selling off a portion of Aramco they will be reducing the value of their stake in Aramco. It's not like a minority stakeholder in Aramco is going to be able to push changes that would result in more value being created. Things are about to get real for Saudi Arabia. The price of oil will probably never recover the point where their government budget will balance. The whole house of cards comes tumbling down if they piss off their populace by reducing subsidizes and/or introducing taxes.
    • Cyph0n 10y ago
      The Gulf countries have already started implementing VAT on certain goods, and I believe that the UAE will start charging VAT by next year. And even after they implement widespread taxation, they won't have to worry much about "pissing off their populace". You wouldn't believe just how much they invest in surveillance, weaponry, and military training. Some of the top dogs have their own private armies - usually military contractors - in case of conflict within the monarchy itself. It's crazy stuff. On top of that, citizens of Gulf countries are usually very trusting of their leaders for cultural reasons. It goes back to the bedouin way of life. As for non-citizens (i.e., expats), they usually keep their mouth shut to avoid ending up on the next flight back home. The two reasons above are mainly why nothing happened in the Gulf during the Arab Spring. Bahrain was an exception: the motivation there was more sectarian than political. The Shia majority were not satisfied with the Sunni monarchy, and so they wanted to install Shia rulers in their place. It's rumored that Iran was heavily backing a coup attempt, which is why the Saudis were called in.
  • stale2002 10y ago
    They would if a new government came into power and decided to seize the means of production.
  • PeterisP 10y ago
    Increasing the tax rate or any other means to extract more funds from it directly to the government would clearly cause it to lose a lot of value to the outside investors, and is something that a government might do in the future, it's happened in many other cases with similar enterprises around the world.
• trome 10y ago
  Plus, 25% of the oil produced by Saudi Aramco is consumed domestically at very low prices, as the population of the KSA continues to grow this is apt to increase.
• ellius 10y ago
  That's likely part of their calculus. By shelling out shares in a massively profitable company, they tie their interests to the buyers, who are likely to have considerable influence and will further continue to prop up their regime.
  • devoply 10y ago
    This is exactly right. In fact if any of the people running the Middle East were more intelligent, they would've done just that decades ago. Aramco use to belong at least in part to the US until the 80s when it was bought out fully by the Saudis. It looks like they are selling it back in hopes of keeping Saudis a float. But really for how long. On the other hand, I have heard from some Capitalists that it's an easy game if you have money as long as you manage it well. It just keeps making more money and you don't have to do shit. The Saudis are pretty used to this by now, not doing shit, messing up the world, and being rewarded for their misdeeds.