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World

Saudi Arabia Begins Selling Shares Of Its Oil Giant, Aramco

AUDIE CORNISH, HOST:

Saudi Arabia today began selling off shares of its giant oil company, Saudi Aramco. The buyers were mainly from the kingdom or nearby. So the price quickly rose about 10% after the opening bell at the exchange in the Saudi capital. NPR's Jackie Northam reports.

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UNIDENTIFIED PERSON: (Non-English language spoken).

JACKIE NORTHAM, BYLINE: There was a glitzy ceremony, complete with laser lights and confetti, for the crowd gathered at the Tadawul, the domestic Saudi stock exchange.

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NORTHAM: Senior oil officials rang a gold bell, marking the start of trading of Aramco shares. The ceremony was fitting for the company considered Saudi Arabia's crown jewel. Aramco is one of the most profitable companies in the world, earning $111 billion last year. And it did better than expected on the first day of trading.

ELLEN WALD: I would consider this a political success for the monarchy, but not a financial success.

NORTHAM: Ellen Wald is president of Transversal Consulting, an energy and geopolitical firm. She says while the valuation came in higher than expected, the listing fell short of the kingdom's goals because many important investors stayed away from the Aramco IPO.

WALD: What the Saudis originally intended for this IPO was to attract a lot of foreign capital to the kingdom and to this investment. And instead of that, we're seeing a largely Saudi affair, which has essentially evolved into a transfer of wealth from the Saudi people and Saudi businesses to the Saudi government.

NORTHAM: The effort to sell off a small slice of Aramco was spearheaded by Crown Prince Mohammed bin Salman. He wants to use most of the proceeds to help overhaul Saudi Arabia's oil-dependent economy. But his ambitious plans have had to be scaled back. Only 1.5% of Aramco is being sold off, and international investors disputed the kingdom's claim that Aramco was worth $2 trillion.

Adnan Mazarei, a Saudi specialist at the Peterson Institute for International Economics, says there were also concerns about the oil company's transparency.

ADNAN MAZAREI: Aramco is very much under the influence of the Saudi government, needless to say. Therefore, politics will affect its commercial decisions.

NORTHAM: Mazarei says international investors were rattled in 2017 when the Saudi authorities rounded up about 300 businessmen and held them at a Riyadh hotel for several months as part of an anti-corruption campaign. There was also concern over the killing of Saudi journalist Jamal Khashoggi. Then there was the September attack on the Aramco facilities, says Mazarei.

MAZAREI: Their recent drone attacks shows how vulnerable the Saudi oil output is. Although there has been a recovery of the oil output that was lost to those drone attacks, it nevertheless shows how vulnerable Saudi oil output is.

NORTHAM: Which is another thing that international investors will be watching.

Jackie Northam, NPR News.

(SOUNDBITE OF J'SAN'S "AWAKENING") Transcript provided by NPR, Copyright NPR.