London woos Saudi Aramco with US$2b loan guarantee

By offering the loan guarantee, Britain is seen as helping Saudi Arabia to diversify its oil-dependent economy. (AFP/Fayez Nureldine)

Britain is seen as wooing the company ahead of a stock market flotation next year which it hopes will be in London, even if the government denied that this was the reason for it guaranteeing bank loans to the kingdom.

The guarantee will be supplied by UK Export Finance, a state credit agency which seeks to improve the country's trade balance by providing finance to foreign buyers.

"UKEF's support will take the form of a US$2-billion (€1.72-billion) guarantee on bank lending," the government said in a statement.

It pointed out that UKEF had already provided Saudi Aramco with nearly £500 million in support to UK exports over the past five years.

"This (guarantee) has nothing to do with the potential float, it's about increasing UK exports," a Treasury spokesman told AFP.

Saudi Arabia last year announced plans to sell under five percent of Aramco in the world's largest ever initial public offering.

Britain is laying down the red carpet to convince Riyadh that it should choose to list in London, whose status as a leading stock exchange is at risk from the UK's decision to leave the European Union.

On a visit to Saudi Arabia with UK business leaders in April, British Prime Minister Theresa May pitched the London bourse as a venue for the expected listing, with Britain facing competition from other key financial centres, including New York.

May reportedly held a private meeting with Energy Minister Khaled al-Falih, who also heads Aramco, in the presence of London Stock Exchange Group chief, Xavier Rolet.

By offering the loan guarantee, Britain is seen as helping Saudi Arabia to diversify its oil-dependent economy.

But May's visit to the ultra-conservative kingdom faced criticism back in Britain and ahead of the trip, she had faced calls to raise rights issues with its leaders.