Saudi Arabia Reduces Its Stake in Aramco – Is Oil Losing Its Shine in the Gulf Nation?

Saudi Arabia's recent plan to sell stakes in Aramco is increasingly being seen as the country's move towards shifting its economy away from just oil to other sources of income

Aramco, the energy giant and the crown jewel of Saudi Arabia's economy, is set to witness a major stake sale in the coming week by the government, possibly generating over $10 billion. This comes as the Gulf nation looks to diversify its revenue streams and move away from its heavy reliance on oil.

According to media reports, the proceeds from the sale will be used to fund major projects in AI, sports, and tourism. However, the fact that Aramco, the world's largest oil company by market cap, is witnessing a declining interest from the Gulf nation speaks a lot about the changing economic picture of Saudi Arabia.

Aramco's faltering figures

On a year-to-date basis, the shares of the oil giant have delivered a negative return of nearly 12 per cent on the Saudi Exchange or Tadawul. The company's net profit also witnessed a nearly 25 per cent decline from a record $161.1 billion reported in 2022. Despite the declining figures, Aramco announced a mega-dividend of $20.3 billion for the fourth quarter.

There is no denying that the energy giant continues to remain a profitable asset for the Saudi government but the country is making sure that this leverage on capitalisation is kept in check.

In a statement earlier this year, Aramco stated that the company would be putting a pause on its plan to raise the oil production capacity from 12 million barrels per day to 13 million barrels per day. Something that could have given a major boost to capital investment. However, there is a bigger picture that is being overlooked.

Under its Vision 2030, the country already made it clear that it will be shifting its economic reliance away from oil. While the recent stake sale in Aramco supports this idea behind the shift, Saudi’s increased interest in sporting events might give an even clearer picture of this.

Gaming it through

The country has already gained the rights to host the FIFA World Cup in 2034. Beyond football, Saudi Arabia has also tossed its bid in WWE, horse racing, boxing, golf and Formula 1 racing. Last year, there were rumors that the country was considering investing heavily in the Indian Premier League (IPL).

Many have called this increased interest in sporting events a mere act of ‘sportswashing’ which basically means hiding behind the curtains of sporting events to distract people from the ill practices or the wrongdoings of the government. While this seems quite fair at some point in Saudi Arabia’s case, there is probably more to it.

As the country moves away from relying heavily on oil, it's becoming obvious that tourism, especially when backed by sports, is the perfect path forward, not only making the economic pivot smooth but also improving its tarnished reputation on the international stage.

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