The British Government is on the cusp of issuing a $2 billion (£1.5 billion) loan guarantee to Saudi Aramco, but said the move was not an attempt to woo the energy giant to list in London.
The Treasury said the guarantee would allow a bank to make large loans to the world’s biggest oil producer, while also boosting UK exports by encouraging Saudi Aramco to pay for services from British firms.
UK Export Finance (UKEF) is charged with providing the credit backstop after guaranteeing around £500 million in loans to the oil producer in the past.
The move comes after the Government ramped up its charm offensive on Monday, with Prime Minister Theresa May saying the London Stock Exchange (LSE) had made a “very strong case” for hosting Saudi Armaco’s expected $2 trillion (£1.5 trillion) flotation.
However, a spokesman for the Treasury said on Thursday: “This has nothing to do with the potential float.
“UK Export Finance works to increase UK exports by providing finance to overseas buyers of our goods and services.
“As part of this, 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.
“In the coming months UKEF will be running a series of exporter events to help connect British suppliers with Aramco to fully realise the mutual benefits of this support.”
The Government said a high level of due diligence had gone into the agreement, which is expected to benefit oil and gas and renewable energy firms.
However, the announcement drew criticism from ex-Treasury official Nick Macpherson, who tweeted: “HMG guaranteeing a loan to Aramco would be a further lurch in descent to mercantilism. Mr Gladstone will be turning in his grave. #stateaid”
Britain’s financial watchdog recently put forward proposals that would allow Saudi Aramco to sidestep rules that make companies sell at least 25% of their shares to gain “premium” status.
It would create a new category of listing that could pave the way for Aramco, which is looking to list around 5% of shares, to float in London in what is set to be the biggest initial public offering (IPO) in history.
US president Donald Trump also tweeted on Saturday that he “would very much appreciate Saudi Arabia doing their IPO of Aramco with the New York Stock Exchange”.