Saudi Arabia Considers Radical Changes to its Political Economy

Jan. 7, 2016 Saudi Arabia’s consideration of an IPO for its state-owned oil firm suggests the country is in need of financial resources to maintain stability internally and strengthen its position in the Middle East.

Briefing

|January 7, 2016

At Geopolitical Futures, our forecasting model defines Saudi Arabia as one of the four major powers in the Middle East. Despite its massive petroleum wealth, it is also the weakest of these four but, at the same time, it is trying to shoulder security responsibility for an Arab world in turmoil. Therefore, it is significant that Riyadh announced in an interview published today that it is mulling over the idea of launching an initial public offering for its state-owned oil firm, Aramco. The move represents a massive shift in the kingdom’s approach to managing the company, the majority of which was nationalized in 1973. Even as late as a little over a year ago, when oil prices were hovering at $112 barrel, this policy would have been unthinkable for Riyadh. However, the steep plunge in oil prices, which has brought crude down to under $35, suggests that the Saudis, despite their massive reserves, realize that in the not-too-distant future, they will be in need of cash.

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