Saudi Arabia: The sticky politics of war and peace greased by a $24 billion IPO

The three-day Future Investment Initiative (FII), also known as the ‘Davos of the Desert’, which concluded on October 31 at Riyadh’s fancy yellow desert stone building, Ritz Carlton Hotel, was abuzz with intense speculation on whether Saudi Arabia can come out with a public issue of its most precious and profitable company, Saudi Aramco. This was barely 45 days after September 14 when its oil installations were mysteriously bombed and severely damaged by a medley of missiles and suicide drones. On the fateful day, Saudi Aramco lost more than half of its daily oil production, but quickly restored its production within a few weeks.

At networking sessions at the summit, answers were sought by journalists and investors on whether the IPO could succeed without the Saudi government finding ways to end tensions with Iran and its embarrassing war with neighbour Yemen. In the absence of that, the common belief was that Saudi Aramco would neither get a high valuation nor a good price for its shares. Saudi Aramco, a government-owned company after it nationalised Standard Oil Company, has been looking forward to raising about $24 billion from the IPO to fund its energy diversification plans. It could be just below the biggest IPO till now which was $25 billion for Jack Ma’s company, Ali Baba.

Emboldened by a stirring response from world leaders that included Indian Prime Minister Narendra Modi, Brazil’s Jair Bolsanaro and King Hussein of Jordan, investors and investment bankers to the summit — a year after the bizarre killing of journalist Jamal Khashoggi in the Saudi embassy of Istanbul in Turkey, that had dampened response to an earlier summit last year, the Saudi government announced its decision to come out with a public issue. Share sales begin from November 17 and ended on December 5. 

“The IPO will not reach its target if they cannot guarantee that there will be no further attacks on their installations,” wondered a Riyadh-based diplomat. In the early hours of September 14, in a space of 15 minutes, missiles and drones hit the highly protected oil facility in Khurais, and world’s biggest refinery, Abqaiq. The US claimed Iran was involved. President Donald Trump claimed that his forces were “cocked and ready to shoot” in Iran; consequently, and surprisingly, he backed off. 

The common belief was that Saudi Aramco would neither get a high valuation nor a good price for its shares. Saudi Aramco, a government-owned company after it nationalised Standard Oil Company, has been looking forward to raising about $24 billion from the IPO to fund its energy diversification plans. It could be just below the biggest IPO till now which was $25 billion for Jack Ma’s company, Ali Baba.

Saudi Arabia did not blame Tehran directly, but it gave ample hints that they could be behind the Houthi rebels who are at war with them in Yemen. During a media briefing, the Saudi defense spokesperson showed the wreckage of drones and some ballistic missiles used by Houthis in the past. One of them had hit the Diplomatic Quarter in Riyadh, which is a stone’s throw from the Ritz Carlton, and also serves as the ‘detention center’ for rich oligarchs.  

The Saudi government seems to be cognizant of making up with its enemies so as to make a success of the IPO and also to preserve its considerable natural assets from future violence. Former Indian ambassador to the region Zikr ur Rehman feels that Saudi Arabia is not using the IPO for peace, but if big investors put in their funds in the Saudi Aramco public issue, then that would work towards stabilizing the region.

However, feelers were sent to Iran, first through the Iraqi foreign minister and later through Pakistan Prime Minister Imran Khan — who was brought in by Trump to broker peace between the two countries. Khan, whose country’s longstanding dispute with its neighbour, India, and unending sectarian strife within, disqualifies him to negotiate entente between Iran and Saudi Arabia, was welcomed warmly in Tehran by Iran’s President Hassan Rouhani, who offered to cooperate with him in his mission. 

Saudi Arabia’s statement after the meeting between Khan and Crown Prince Muhammad bin Salman did not mention Iran or Pakistan’s peace mission. Pakistan’s foreign minister, Shah Mahmood Quereshi, claims that Saudis agreed to a “peaceful diplomatic process”. He also claimed that the clouds of war were slowly dispersing.

Notwithstanding Pakistan’s bid to sort out a difficult dispute between the two historical rivals, Riyadh began to clean up its messy scrap with the Houthi tribals of Yemen. In recent months, Houthis have tasted considerable military success and have made ingresses into Saudi Arabian territory also. It’s their missiles and drones that have proved to be a major bother.

A Putin aide told journalists that his boss was supposed to talk about “regional stability” with Crown Prince Muhammad Bin Salman in the meet. Some believe that Putin never travels anywhere till there is a compelling reason. Putin recognises the power the Saudis wield in the Islamic world and would be happy to bring peace rather than just end the many wars in this troubled land.

On November 5, the internationally recognised government of Yemen and UAE-backed State Transitional Council (STC) signed a power-sharing deal to stop fighting. The UAE is an ally of Saudi Arabia, but they have been supporting Southern Yemen that does not identify itself with the Houthis. The southern part has the Aden port as its capital. It earlier had a Marxist-Leninist government. This part is enlightened and does not really relate to the north. 

In recent months, the Saudi-recognised government of Hadi had captured some territories of this region deepening differences in the grand coalition that the Saudis had put together against the Houthis. This scrap between the Yemen government and STC was embarrassing for Riyadh. By brokering an agreement, Riyadh came to a step closer to build a coherent military and diplomatic challenge to the Houthis – who have begun to hold their fire but are also quietly negotiating with them in Oman. An agency report claims that these talks began just after the Abqaiq-Khurais attack. 

The Houthis claim the right to retaliate against the Saudis after they have tried to pulverize them by conducting 17,000 air attacks that dropping 50,000 bombs that left more than 1,00,000 people dead and millions of ordinary citizens injured and displaced.

The Saudis have been alleging that the Iranians are behind the Houthis as they do not have the military capability to put together such weaponised drones that could hit the oil installations with such precision. During a visit to Abqaiq and Khurais, one discovered that the cruise missiles not only pierced through their much-vaunted defense systems but, as a commentator said, they were “exquisitely precise” — hitting the spheroids and stabilisation towers at the same places of the refinery. Almost 25 targets were hit by them in the September 14 attack.

Russian President Vladimir Putin could play a major role in ensuring the success of not just the IPO but also in helping with the peace process. He can also ensure that oil prices do not crash due to the growing glut in the market. Russia’s 2018 agreement with Saudi Arabia to cut oil production to stabilise oil prices brought the two countries together. Interestingly, Putin, who has excellent ties with Tehran, called his relationship with the Saudis as ‘extraordinary’. 

A Putin aide told journalists that his boss was supposed to talk about “regional stability” with Crown Prince Muhammad Bin Salman in the meet. Some believe that Putin never travels anywhere until there is a compelling reason. The Russian president, who is trying to keep Syria afloat and work with other regional interests, would be keen to arbiter peace between Iran and Saudi Arabia so that many of its own troubles like saving its ally Syria from Islamic State terrorists could be accomplished. Putin recognises the power the Saudis wield in the Islamic world and would be happy to bring peace rather than just end the many wars in this troubled land.