How the oil earnings of Saudi Aramco, the world’s most profitable company, are helping the Saudi monarchy shake up the global economic order

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How the oil earnings of Saudi Aramco, the world’s most profitable company, are helping the Saudi monarchy shake up the global economic order

By Vivienne Walt | Fortune Magazine | April-May 2024 Issue

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Saudi Aramco, the most profitable company in the world over the past decade. The state-owned energy giant pumps out oil at a rate no other single company can match—at margins that are the envy of every competitor. Its revenues, which reached $440 billion in 2023, make up about 40% of Saudi Arabia’s GDP. Its enormous earnings finance hundreds of billions of dollars’ worth of Saudi investments, both internally—in the kingdom’s mammoth construction and tourism projects and its efforts to diversify its economy—and globally, through the intricate web of stakes that Saudi’s sovereign wealth fund, the Public Investment Fund (or PIF), has amassed in companies, sports franchises, and real estate worldwide. 

While a tiny share of Aramco is publicly traded, the company is majority owned by the Saudi state, their agendas inexorably linked. Aramco in return provides the means for the crown prince’s overhaul of the Saudi economy, and his efforts to reshape the global economic order. That gives Saudi Arabia and its leader disproportionate clout beyond the kingdom, in the biggest geopolitical issues of our time—from prospects for peace in the Middle East to the global fight against climate change. And how MBS exerts that influence will hinge in part on how much money Aramco can make.

MBS has pushed through the most radical remake of the country since the Saud dynasty founded its absolute monarchy in the 1930s—including outward liberalization in what had long been one of the world’s most religiously conservative countries for which MBS got resonation not only among the youth, but also in the West.  No leader expressed surprise last year when MBS clinched hosting rights for the World Expo 2030—a six-month international extravaganza. 

If the absence of democracy is the price to pay for such pleasures, many Saudis appear to have decided it is worth the trade. The same goes for some giants of Western business—including BlackRock, Amazon, and Alphabet—which have welcomed Saudi capital and invested in the country. The kingdom is also a player in the AI race rather it could become the world’s biggest investor in AI.

But the Aramco cash machine is by no means guaranteed to last forever. In a world undergoing a complicated, urgent energy transition, Aramco’s continued health—and Saudi Arabia’s—will depend on how well the energy giant both shapes and adapts to the changes. For now, the billions from Aramco revenues flow to the PIF, which then spends lavishly on the kingdom’s new economy, including its investments in a green transition. 

For now, though, the massive profits from those hydrocarbons are playing a dual role, laying a foundation for a modernized, multi-industry economy while putting MBS closer to the center of the world’s geopolitical web. MBS has proved skillful at using his immense riches to juggle alliances around the world. After the European Union banned Russian diesel in 2022, in punishment for Vladimir Putin’s war on Ukraine, MBS boosted oil exports to Europe, to make up for some of the shortfall—while at the same time importing Russian fuel to Saudi Arabia, to compensate Putin for his losses under sanctions.  And not coincidentally MBS’s ties with China’s Xi Jinping have become quite warm. 

3 key takeaways from the article

1. Saudi Aramco, the most profitable company in the world over the past decade. Its revenues, which reached $440 billion in 2023, make up about 40% of Saudi Arabia’s GDP. 
2. Aramco’s enormous earnings finance hundreds of billions of dollars’ worth of Saudi investments, both internally—in the kingdom’s mammoth construction and tourism projects and its efforts to diversify its economy—and globally, through the intricate web of stakes that Saudi’s sovereign wealth fund, the Public Investment Fund (or PIF), has amassed in companies, sports franchises, and real estate worldwide. 
3. But the Aramco cash machine is by no means guaranteed to last forever. In a world undergoing a complicated, urgent energy transition, Aramco’s continued health—and Saudi Arabia’s—will depend on how well the energy giant both shapes and adapts to the changes. For now, though, the massive profits from those hydrocarbons are playing a dual role, laying a foundation for a modernized, multi-industry economy while putting country’s crown prince closer to the center of the world’s geopolitical web.

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Topics:  Saudi Arabia, Oil, Neom, Alternative Energy, Global Politics, Inflation