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Illustration: Sarah Grillo/Axios

Aramco, Saudi Arabia's state-owned oil company, promised this week that it would set a dividend of at least $75 billion through 2024 — or, that non-government shareholders would receive at least $750 million in dividends for every 1% of the company that they own, from 2020 through 2024.

Why it matters: Because the Saudi royal family controls Aramco, it doesn't need the company to pay any dividends at all. If they need to extract money from Aramco, they can always raise the company's tax rate, or simply expropriate what they need.

  • Foreign shareholders could be stuck with worthless shares paying zero dividends.

Between the lines: In many ways the Aramco situation is similar to that of Fannie Mae and Freddie Mac. The U.S. government controls the agencies and their profits. Private shareholders, who own 20% of the equity in the companies, have received nothing from them for over a decade.

  • If the U.S. government allowed Fannie and Freddie to start paying a dividend, shares would rise. But so long as the government holds the reins, shareholders know that their cashflows can always revert to zero at any time.
  • The bull case for Aramco shares is that the Saudi government wants to see a multitrillion-dollar valuation for the company. If that fact ever changes, then it's hard to see foreign shareholders being able to extract much value.

Why you’ll hear about this again: Investing in autocracies is part of modern capitalism. In China, for instance, PayPal is buying Gopay, a local payments provider.

  • It's easy to see why PayPal wants exposure to the massive Chinese market — but at the same time the company knows there's always a risk of the government turning against it and nullifying the deal.
  • If that happens, PayPal has no real recourse. (It's not going to sue the Chinese government in Chinese courts.)

The bottom line: In countries with robust civil societies, shareholders have significant legally enforceable rights, and those rights underpin the value of their shares. In countries like China and Saudi Arabia, by contrast, foreign shareholders only win insofar as it behooves the local government to keep them happy.

Go deeper: Saudi Aramco revs up IPO sales pitch

Go deeper

Scoop: Biden meeting Quad amid own pivot toward Asia

Artists paint portraits of President Biden and Vice President Kamala Harris in Mumbai, India. Photo: Anshuman Poyrekar/Hindustan Times via Getty Images

President Biden plans to meet this month with the leaders of Japan, Australia and India in a virtual summit of the so-called Quad, according to people familiar with the matter.

Why it matters: By putting a Quad meeting on the president’s schedule, the White House is signaling the importance of partnerships and alliances to counter China’s growing influence in the Indo-Pacific region.

AOC challenges Puerto Rico governor over statehood

Rep. Alexandria Ocasio-Cortez at New York's Puerto Rican Day Parade in 2019. Photo: Erin Lefevre/NurPhoto via Getty Images

Reps. Alexandria Ocasio-Cortez and Nydia Velázquez are pushing ahead with a bill in Congress that would let Puerto Rico decide its future — a proposal threatening Gov. Pedro Pierluisi's determination to pursue statehood for the island.

Why it matters: There's an urgency among supporters of statehood to get it done while Democrats control both chambers of Congress, and President Biden has been publicly supportive. But there's a growing divide within the party about whether statehood is actually the best solution for the U.S. territory.

"Cat in the Hat" puts cash in the bank for GOP

Illustration: Annelise Capossela/Axios

The House Republicans’ campaign arm is offering donors copies of the Dr. Seuss classic “The Cat in the Hat," seeking to capitalize on a new front in the culture war.

Why it matters: The offer, while gimmicky, shows how potent appeals to “cancel culture” can be for grassroots Republicans, even amid debates about more weighty policy matters like coronavirus relief and voting rights.