04:48 GMT26 May 2020
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    Saudi Arabia’s plan to launch an initial public offering (IPO) of its Aramco Corporation seems motivated to attract revenue and short-term profits, but it will not affect global prices, retired International Monetary Fund (IMF) senior official Jon Shields told Sputnik.

    WASHINGTON (Sputnik) — The company's valuation, according to officials speaking to The Economist, which broke the story, could be in the "trillions of dollars," with Bloomberg suggesting that Aramco, by far the largest energy company in the world, may be worth up to $2.5 trillion.

    "Redirecting or repricing Saudi output, on this basis, would have more to do with maximizing their own short-term profits… than attempting to manipulate global prices," Shields told Sputnik. "Oil is highly fungible, so that minor differences in prices have very little influence on global trends."

    The giant Saudi state energy company Saudi Arabian Oil Company (Aramco), with 261 billion barrels in reserves and 60,000 staff, has confirmed rumors that it is considering offering investors an IPO on a small percentage of the company around 5 percent.

    "The Saudis know that the only way they can assure a high long-term price and demand for their oil stocks is to drive out alternative energy sources," Shields pointed out.

    However, "What matters is total current world demand and expectations of future world supply," Shields cautioned.

    Saudi Deputy Crown Prince Mohammed bin Salman, the son of King Salman, has indicated that an IPO float could be made immediately following a review of the business, scheduled to be completed within the next several months.

    "Liquefying some assets now, preventing security considerations from encouraging new producers [and] stiffing Iran may be issues they have to factor in, but they are probably subsidiary considerations."

    Experts say the launching of such an IPO would be probably undertaken to feed state coffers amid weak energy prices, while the Saudi government monitors the actual value of its national wealth.

    However, Shields pointed out that while Deputy Crown Prince Mohammed was clearly pursuing the traditional Saudi aim of keeping revenue high while maximizing market share, he was looking at a bold new way for Riyadh to do so.

    "It may just be that he fancies having a bit of fun in pursuing the traditional goals in his own way," he told Sputnik.

    Shields also expressed skepticism that the Saudis needed to plan for long-term, structurally low global oil prices.

    "My assumption is that oil prices will spike up again before too long –whether to $50, $80 or $120, I have no view," he said.

    Even a small Aramco IPO of five percent at a valuation of $1.5 trillion, Business Insider pointed out, would still amount to $75 billion.

    Jon Shields served as deputy division chief at the IMF Africa Department.

    He previously was a mission chief for Equatorial Guinea, Malawi, Liberia, Angola and Gambia. Shields also headed the Fiscal Transparency Unit at the IMF’s Fiscal Affairs Department.

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