To win these short term gains Trump is prepared to compromise the integrity of our economic system, exposing American investors to some serious and irreversible financial, legal and ethical challenges.
Taking public a company like Aramco entails disclosures the company was never willing to make. For example, it requires the Saudis to share with the public its detailed geological data, its well-by-well production costs, its precise financial relations with the Saudi government and its hiring and operating procedures. All of those have been closely guarded state secrets. But it is far from certain that the Saudi government, which effectively runs Aramco, will be ready to open its books, and even if it did it will only do so for the 5 percent of the company offered to the public while keeping the veil of secrecy on the other 95 percent.
This begs the question which assets or business segments will fall within the 5 percent? What will be their interaction with the other 95 percent of the company retained under state control? Will shareholders of the 5 percent be accountable to decisions made by the 95 percent? Who decides?
This issue is particularly important since while the 5 percent will supposedly be governed by free market forces, the 95 percent will be effectively steered by a price-fixing cartel — OPEC — the very same organization that Trump has been criticizing for years for cheating America through oil price manipulations.
OPEC members collectively own more than two thirds of the world’s conventional crude reserves and they account for one third of global production. Over the past 40 years non-OPEC production has doubled yet the cartel’s production has barely changed and is around 32 million barrels per day. It can affect oil prices at will in ways no other player in the oil market can.
Saudi Aramco is not only the largest producer within OPEC, it is also the driving force behind the cartel’s decisions, including the most recent one to extend oil production cuts in order to support prices. Since oil export is the main source of income for the Saudi government, OPEC’s decisions will always be subservient to the Kingdom’s budgetary needs.
