Can Saudi Aramco's IPO Bring Peace to the Middle East?
WHY YOU SHOULD CARE
A period of calmness opens up opportunities for key negotiations that could bring longer-term peace.
By Sanjay Kapoor
At the yellow desert stone convention center at the Ritz-Carlton Hotel, Riyadh, people were chatting about the potential size of what Saudi Arabia hopes will be the world’s biggest-ever IPO. This was Crown Prince Mohammed bin Salman’s end-of-October “Davos of the Desert” conclave — formally called the Future Investment Initiative summit, held as Saudi Aramco, the Saudi oil giant, prepares to launch its IPO on Dec. 4, expecting to fetch $25 billion in investment.
Just six weeks earlier, the cautiously optimistic conversations around the Aramco IPO at the Riyadh summit would have been hard to imagine. When a series of deafening explosions rocked the world’s largest refinery in Abqaiq, Saudi Arabia, in the early hours of Sept. 14, fresh regional conflict appeared only hours away. Fire also rained on the oil collection center of Khurais. As the smoke and haze cleared from the sprawling oil facilities, Saudi Arabia’s oil managers realized that they had lost 85 percent of their daily production. Yet even as the U.S. and Israel quickly blamed Iran for the attacks, Saudi Arabia held its horses, reluctant to name Tehran.
It was one among a series of moves by Saudi Arabia that experts say point to its desire not to inflame regional tensions at a time it’s desperately seeking investments in Aramco, the world’s most profitable firm. The divestment of shares in Aramco is central to the Crown Prince’s plans to fund other industries and diversify the oil-dependent nation’s economy away from crude. But investors seek stability. That’s creating a rare window for peace in the volatile region closely tied to U.S. influence and interests.
Early indications from Syria and Iraq are that Saudi Arabia is confronting Iran less and less.
Aftab Kamal Pasha, Jawaharlal Nehru University, New Delhi
Riyadh maintained restraint after the attacks on Abqaiq and Khurais, even as it was mocked by some in Israel’s media. “We are no Saudi Arabia,” a headline in the daily Haaretz claimed when Israeli Defense Forces (IDF) bombed Syria to hit back against a missile attack that originated there.
Then, on Oct. 10, when missiles attacked an Iranian oil tanker, Sabiti, near Saudi Arabia’s Red Sea port of Jeddah, Riyadh surprisingly offered help, even though the vessel turned off its transponders and sailed back to Iranian waters. Iran reciprocated the gesture, blaming “a nation” — not naming Saudi Arabia. In Yemen, Saudi Arabia is negotiating with the Iran-backed Houthi rebels, who have claimed responsibility for the attacks on Abqaiq and Khurais. These talks are brokered by Oman’s government.
“Early indications from Syria and Iraq are that Saudi Arabia is confronting Iran less and less,” says Aftab Kamal Pasha, West Asia analyst and professor at New Delhi’s Jawaharlal Nehru University, adding that Riyadh has begun to cut back funding for outfits battling against Syrian President Bashar Assad’s regime.
To be sure, the attempts at peace from both sides — Saudi Arabia and Iran — are temporary at best and linked to their immediate needs. Iran, for instance, is battling its own domestic political crisis, with protesters challenging its government’s economic mismanagement amid crippling U.S. sanctions. The existential divide between Saudi Arabia and Iran — which also provide leadership to two hostile Islamic sects, the Shias and Sunnis — and their battle for regional influence remain as entrenched as ever. And Pasha’s assertion is disputed by many other Arab watchers, who see the imprimatur of the U.S. and Saudi Arabia in the anti-fuel hike protests in Iran, as well as those sweeping Iraq and Lebanon.
Yet Saudi Arabia’s efforts at insulating the Aramco IPO from regional tensions are clear. I visited the Abqaiq and Khurais oil facilities 45 days after the attacks. The missiles had targeted stabilization towers with pinpoint precision, but no oil well was hit. Within 10 days of the attacks, the facilities were fixed. Save for some scrap lying around, there was nothing to show that such a catastrophe had visited these installations located in the hot, dusty interiors of Saudi Arabia.
There are no guarantees the IPO will work. Aramco has been valued at $1.7 trillion, where Saudi Arabia was hoping for $2 trillion. But the IPO and the need for peace to attract investors coincides with other factors too that are making Saudi Arabia rethink its traditional approach to the region.
Saudi Arabia has dropped 50,000 bombs on Yemen over the past four years, killing more than 100,000 people. Yet the Houthis have stood their ground and made ingresses with Saudi Arabia, much to the embarrassment of Riyadh.
There’s a second reason, suggests Narayanappa Janardhan, a research fellow at the Abu Dhabi-based Emirates Diplomatic Academy, in a research paper. He identifies that as “Washington’s diminished credibility and deterrence value in a region that has a U.S.-centric security system, and the increased security vulnerability for the Gulf Arab countries, especially Saudi Arabia and the United Arab Emirates.”
That’s why Crown Prince Mohammed, who seems to have regained some of the reputation he lost after the bizarre killing of journalist Jamal Khashoggi last year, is trying to make up with disparate enemies on his own. There are the Iranians and the Houthis. In Yemen, he also has steered an agreement between the government recognized by him and the UAE-backed Southern Transitional Council (STC). The southern part of this war-devastated country, which was earlier ruled by a Marxist government, does not really identify itself with desperadoes in the north.
Saudi Arabia is also banking on the enormous influence that Russian President Vladimir Putin has garnered in this region. Putin has not just helped Riyadh stabilize oil prices by working out a deal to cut production with OPEC, but he is also best qualified to ensure that no further harm visits them as the Saudis go about raising funds to build a non-hydrocarbon-based economy. That influence has come on the back of Russia’s role in decimating the Islamic State threat in Syria — and amid America’s retreating influence.
If Saudi Arabia’s efforts succeed, the Aramco IPO might prove worth more than the dollars in investments the company draws — its gains might include lives saved from conflict.
- Sanjay Kapoor, OZY Author Contact Sanjay Kapoor