This article was published on May 15, 2025, at 4:10 p.m. on the ChosunBiz MoneyMove site.
Saudi Arabia's state oil company Aramco has temporarily suspended its venture fund investment intended for promising South Korean startups. This is due to poor performance caused by low oil prices, leading to increased financial pressure on the Saudi government.
The amount Aramco was going to invest in South Korea is small compared to Aramco's size, but the decision-making process to minimize expenditure has also led to a halt in investment in South Korea.
On the 15th, according to the venture capital (VC) industry, Aramco has recently suspended the selection process for venture fund managers (GP) targeting domestic VCs, indefinitely postponing it. This came five months after starting VC contacts using its refinery subsidiary S-oil earlier this year, having selected qualified candidates last month.
Originally, Aramco planned to explore promising startups in South Korea and broaden the foundation for developing non-oil and sustainable businesses. Aramco Ventures, Aramco's corporate VC, was set to contribute part of the fund's capital to a fund of funds structure, planning to invest up to 15 billion won with S-oil.
The decline in oil prices leading to poor Aramco performance resulted in the temporary suspension of investments. In particular, it is reported that the Saudi government ordered the temporary suspension of Aramco's venture fund investments. Dividends from Aramco, a state-owned enterprise, are the main source of funding for the Saudi government, which has been reduced recently.
In fact, the dividends from Aramco to the Saudi government and the sovereign wealth funds (PIF) were 28 trillion won in the first quarter, a decrease of 30% compared to 40 trillion won in the same period last year. The decline in international oil prices significantly contributed to a nearly 5% decrease in Aramco's net profit to about 34 trillion won in the first quarter compared to a year ago.
Despite the small scale of venture fund investments, it is assessed that Saudi Arabia is moving to stop the outflow of money. This is because even Saudi Arabia's mega-city development project 'Neom City' is facing setbacks due to a cash crunch. Saudi Arabia's fiscal deficit in the first quarter was $3.3 billion (4.6 trillion won), more than five times what it was the previous year.
Amidst a rapid decrease in private sector venture fund investments, domestic VCs' hopes for the inflow of 'oil money' have also dwindled. The investment from Aramco into domestic venture funds faced difficulties right from the start. Previously, domestic VCs had anticipated that Aramco would gradually increase the scale of its venture fund investments.
Meanwhile, the investment into South Korean startups by the United Arab Emirates (UAE), seen as a major player in oil money alongside Saudi Arabia, has also stalled. In May last year, they announced plans to establish a joint venture with a domestic VC to create a venture fund in the trillions, but the establishment of the joint venture has not been completed.