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UK lines up US$2bn deal for Saudi Aramco

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The UK has offered oil giant Saudi Aramco a US$2bn (£1.5bn) export loan guarantee. The move has been interpreted by many as a bid to woo the company to hold its market debut, which could prove to be the world’s largest initial public offering (IPO), in London.

UK Export Finance (UKEF) is finalising the details of the deal, which will take the form of guarantees on bank lending. In the last five years, UKEF has provided Saudi Aramco with nearly £500mn in support of UK exports, notably for the Sadara chemicals project.

A government spokesperson tells GTR: “We will be providing Saudi Aramco with support in the form of credit guarantees to procure from the UK. This builds on previous support for UK exports as part of Saudi Aramco joint venture projects.”

The new deal is not on the back of any projects but will act as a general line of credit to support Aramco’s plans for development and diversification of its operations.

“In the coming months UKEF will be running a series of exporter events to help connect UK suppliers with Aramco to fully realise the mutual benefits of this support,” adds the spokesperson.

Timing of the loan has seen many market commentators raise eyebrows, as the Saudi oil company is in the midst of deciding on which stock exchange it will sell a 5% share in its business. The country is pursuing an ambitious economic reform agenda as it seeks to diversify its industries following the recent volatility in the oil market.

The UK, US, Japan and China are also pushing for their own exchanges to be considered.

UK Prime Minister Theresa May and London Stock Exchange CEO, Xavier Rolet, both travelled to Saudi Arabia earlier in the year to discuss the flotation as well as other trade opportunities.

Meanwhile, US President Donald Trump tweeted the US “would very much appreciate Saud Arabia doing their IPO of Aramco with the New York Stock Exchange”.

Former UK treasury official Nicholas Macpherson tweeted that the loan is “a further lurch in descent to mercantilism”, by the UK.

The UKEF has also been criticised for its heavy lending to the fossil fuel sector despite signing up to the Equator Principles, a global framework aiming to promote sustainable project financing.

Last year, a majority of UKEF’s projects supported fossil fuels sectors, leading to criticism that the organisation’s support was not in line with its commitment on climate policy and a greener future. In an exclusive interview with GTR, international trade minister Greg Hands said oil and gas remains an important sector where the UK has strong expertise, and that UKEF support for this sector is fully consistent with its application of the Equator Principles.

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