The Crown Prince and his Power (II)

The World's Most Profitable Company

The IPO of Saudi Aramco, the world's largest oil company, is imminent. After Saudi Arabia's Capital Market Authority approved the step on Sunday, the IPO's execution is expected during the first half of December - i.e. on December 11, according to the Saudi media. Until then the search for potential investors is in full swing. It would probably be one of, if not, the largest IPO in history. By its own accounts, Saudi Aramco has the world's largest oil and gas reserves with about 226.8 billion barrels - five times more than the five large oil companies (ExxonMobil, Shell, Chevron, Total and BP). It is also the world's most profitable company, generating a net profit of US $111.1 billion in 2018. In the first nine months of 2019 alone, the company reached a net profit of US $68 billion - with a turnover of US $244 billion.[1] According to current planning, Saudi Aramco is to sell 1 to 2 percent of the shares and place them on the stock exchange. Analysts estimate Aramco's value to range between US $1.2 and $2.3 trillion - $1.5 trillion at the maximum, according to the majority of experts. Shares ranging from US $12 billion and $46 billion could thus be listed.

Supporting the IPO

The Deutsche Bank is one of the financial institutes supporting Saudi Aramco's IPO. It does not belong to the nine "global coordinators" regarded as the first group in the bank consortium, because of the fact, according to experts, that Qatar is a shareholder of the German credit institute (with 3.05 percent). Currently Qatar is under a total blockade and is being fiercely fought by the ruling Saudi clan. However, the Deutsche Bank is supporting the IPO as a "second-ranked assistant" or "joint bookrunner" alongside its French competitors Crédit Agricole und BNP Paribas, the Spanish Banco Santander and the major UBS bank from Switzerland.[2] The supporting banks are to receive a total 450 million euros for their activities. The Deutsche Bank's exact share is not known.

Consolidation of Power

The IPO is explosive, not least of all because of its foreseeable political consequences. Officially, it is merely meant to flush new money into the Saudi state's PIF, which is due to play a central role in providing the billions in financing for investments for the future - for the transformation of the Saudi economy from a predominantly oil-based economy to one more diversified and tailored to the post-petroleum era. Riyadh is also planning to invest in western companies, with which Riyadh intends to create liabilities. Currently, the PIF has already amassed US $320 billion. According to specialists at Berlin's German Institute for International and Security Affairs (SWP), Crown Prince Muhammad bin Salman is already exercising "massive influence on day-to-day PIF operations." Experts accuse bin Salman of having personally been involved in the murder of the Saudi dissident Jamal Khashoggi in the Saudi consulate in Istanbul.[3] In addition, the former investment banker Yasir al Rumayyan, "one of the Crown Prince's closest personal confidants," is the managing director of PIF and was recently also the chair of Saudi Aramco. The Saudi Aramco's IPO will also result in a further "consolidation of power in the hands of the Crown Prince" through the reinforcement of the PIF, according to SWP.

German Financier of War

This is not the first time that the Deutsche Bank has helped the Saudi ruling clan and the Crown Prince to realize their power-hungry ambitions. It had also financed arms companies supplying Saudi Arabia, during that country's war on Yemen. The financial contracts had been concluded after the war had begun. From the very beginning, the war had provoked sharp criticism around the world, because of its large number of civilian casualties, due mainly to Saudi air raids and because of the catastrophic starvation, which was seriously aggravated by the Saudi's total blockade. (german-foreign-policy.com reported.[4]) During the war, according to research made by the NGO "Facing Finance," the Deutsche Bank had financed, for example, Airbus, BAE Systems and Leonardo business model to the tune of €730 million, even though the resulting MBDA consortium had exported 450 cruise missiles, thousands of air-to-ground missiles and combat planes to Saudi Arabia, which had been and are used in the war on Yemen.[5] In November 2015, the Deutsche Bank had provided a €57 million credit to the US arms manufacturer Raytheon and received shares in the company worth €418 million in January 2019, even though that company had exported thousands of missiles to the Riyadh-led warfare coalition.[6]

With an Excellent Network

The Deutsche Bank was also present at this year's Future Investment Initiative (FII) Conference in Riyadh, last week, where Saudi Arabia was soliciting investors. Last year, numerous companies had boycotted the FII, because just prior to the event, Jamal Khashoggi's murder and the suspected involvement of the Crown Prince Muhammad bin Salman had been made public. This year, the number of prominent participants has again increased, including Jared Kushner, President Donald Trump's son-in-law and personal envoy, the Indian Prime Minister, Narendra Modi and Brazil's President Jair Messias Bolsonaro. German enterprises were also present - alongside the Deutsche Bank, represented by its CEO for the Middle East, also Siemens and Bosch, as well as other companies from Germany.[7] Klaus Kleinfeld, the former manager of Siemens, who is now Crown Prince Muhammad bin Salman's personal business advisor, had been announced. He is considered to still maintain an excellent network of partners, also in Germany.

[1] Mathias Brüggmann, Robert Landgraf: Saudi-Arabien gibt grünes Licht für Börsengang von Saudi Aramco. handelsblatt.com 03.11.2019.

[2] Saudi Aramco in den Startlöchern. Frankfurter Allgemeine Zeitung 30.10.2019.

[3] Stephan Roll: Ein Staatsfonds für den Prinzen. Wirtschaftsreformen und Herrschaftssicherung in Saudi-Arabien. SWP-Studie 13. Berlin, Juni 2019. See also Der Kronprinz und seine Macht.

[4] See also In Flames (III) and Beihilfe zur Hungersnot (III).

[5], [6] Antje Mathez: Wie die Deutsche Bank Geld mit Krieg verdient. fr.de 24.05.2019.

[7] Mathias Brüggmann: Flaute im Ölreich: Saudi-Arabiens Vision 2030 steht an einem Wendepunkt. handelsblatt.com 31.10.2019.