The state of Saudi-UK relations amid diplomatic tensions, Brexit, and the Aramco IPO

  • With the prospect of landing the biggest IPO in history, UK officials want to seize the earliest opportunity to make the case for the London Stock Exchange
  • The UK-Saudi Arabia Strategic Partnership Council could be the foundation for negotiations on a free trade agreement between the UK and Saudi Arabia

Tahseen Consulting's Wes Schwalje spoke with Arabian Business on the implications of British Chancellor of the Exchequer Philip Hammond's high-profile visit to Jeddah. You can read the full article here. 

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What was the focus and significance of the visit?

The timing of Hammond’s visit is not coincidence. His focus is both opportunity and damage control. Given the ongoing dispute over arms sales to Saudi Arabia in Britain, Hammond was seeking to assure Saudi Arabia of Britain’s commitment to its bilateral relationship. 

Now that Aramco’s IPO is back on the table, this dispute and deterioration of affairs between the two countries, could affect Britain’s ambition to list Aramco on the London Stock Exchange, a potentially huge win for the City and a big potential post-Brexit win.

Is his visit related to Brexit?

The UK has made it well known that it is interested in negotiating a free trade agreement with the GCC as a bloc or individual countries.

Saudi Arabia and the UAE are key to realizing this ambition. Building the bilateral trade and investment relationship with Saudi Arabia, the UK’s biggest trading partner in the GCC with exports surging toward $8 billion, could fast track these efforts. Aramco’s potential listing on the London Stock Exchange not only offers a significant financial gain for the City, but it will also help maintain London’s status as Europe’s financial hub amid speculation of a financial exodus post-Brexit.

How does his visit relate to the announcement the Aramco IPO is back on track?

With last week’s statements by the Minister of Energy, Industry, and Mineral Resources confirming the Aramco IPO is back on track, Hammond was joined by the CEO of the London Stock Exchange and the UK Minister for Investment. 

With the prospect of landing the biggest IPO in history, it shouldn’t come as a surprise that UK officials wanted to seize the earliest opportunity to make the case for the London Stock Exchange.

The UK has long been courting Aramco since it announced its IPO. In 2018, the UK’s financial regulator, the Financial Conduct Authority, published a new policy statement regarding the listing of sovereign controlled companies, creating a new category inside of its premium listing scheme and waiving some governance requirements.

What is the significance of the UK-Saudi Arabia Strategic Partnership Council?

The UK-Saudi Arabia Strategic Partnership Council was launched in March 2018, amidst Brexit negotiations and an uncertain economic future for Britain post-Brexit. The Council has identified several opportunities for enhanced economic collaboration in education, financial services, entertainment, healthcare, technology, and defense. The UK-Saudi Arabia Strategic Partnership Council is potentially the foundation for negotiations on a free trade agreement between the UK and Saudi Arabia or even the GCC.