Russia and Saudi Arabia: A case of ‘PEACE FOR OIL and OIL FOR PEACE’

Yesterday witnessed the first arrival of a Saudi monarch on Russian soil and today, the largest Saudi delegation ever to visit Russia, is currently thrashing out the details of multiple bilateral deals in energy and other commercial areas.

The event has confounded many expectations as well as confused many pundits who view geo-political relations, purely on ideological terms. In reality, Saudi Arabia needs Russia and Russia is happy to work with any business partner whose relations can bring something positive to the Russian economy.

A $1 billion joint investment fund related to energy projects has already been established between Saudi and Russia, the details of which will likely emerge this week. Furthermore, a statement from Russia declares, “the leaders (of government and businesses) will consider joint steps to further develop bilateral cooperation in the trade, economic, investment and cultural-humanitarian areas”.

Earlier this year, Russia made a deal with OPEC to freeze oil production in an attempt to stabilise falling oil prices. With the United States rapidly becoming a major factor in energy export markets, Saudi Arabia now finds itself as a kind of competitor with its Washington ally, when it comes to selling oil.

Reuters reports,

“Russian President Vladimir Putin said this week that a pledge by the Organization of the Petroleum Exporting Countries and other producers, including Russia, to cut oil output to boost prices could be extended to the end of 2018, instead of expiring in March 2018.

 Russian Energy Minister Alexander Novak said on Thursday that Moscow would support new countries joining the agreement to restrict oil supply.

The statement came as Saudi Arabia’s King Salman visited Moscow”

Russia could have indeed bucked the OPEC deal and increased production, thus creating a price war between OPEC, of which Saudi is a founding member and non-OPEC energy producers including the US and Russia.

However, Russia opted not to do this for several reasons.

Russia has a natural interest, as most key energy exporters do, in not engaging in a race to the bottom with would-be, let alone actual competitors. In this sense, while Russia as a military and geo-political superpower does not need the protection of OPEC that less powerful energy producers do, it is nevertheless in Moscow’s interest to cooperate with OPEC on a case by case basis. In this sense, Russia has made the decision to value stability of international oil prices more than a would-be ability to undercut competitors and win on volume, while prices plummet in all directions.

Saudi Arabia, for its part, is happy to work with the implied understanding (that may well have been voiced in private) that in exchange for Russian cooperation with OPEC, Saudi will use its surplus sovereign wealth funds which are almost entirely derived from the energy trade, to invest in the Russian economy.

In this sense, Russia’s technology, scientific expertise and growing Eurasian trading routes make a good partner for Saudi’s copious amounts of sovereign wealth.

There is another factor that is also at play. Future Saudi King and current Crown Prince  Mohammad  bin Salman, is eager to diversify the Saudi economy. His pet project, Vision 2030, is already seen as overly ambitious and therefore, Saudi needs all the help it can get in becoming less dependant on oil and on foreign expertise to run the domestic economy.

Russia’s key geographic and geo-political placement on China’s One Belt–One Road combined with Saudi’s already (surprisingly to ideologues) good relations with China, means that Russia is a natural economic partner to Saudi in this sense. Saudi wants and needs as much as it can from One Belt–One Road and now Riyadh is officially working on good terms with the two largest countries along One Belt–One Road.

Saudi Arabia may need Russia more than it needs America

As for lingering foreign policy agreements which have the potential to make life difficult for Saudi and Russia, the short answer is that Russia is not concerned about this and increasingly, nor is Saudi, in spite of what Saudi propaganda designed for a regional Arab audience may indicate.

Saudi Arabia’s foreign policy is far more limited than many acknowledge. While expensively armed, the Saudi armed forces are not well trained and by most accounts, not incredibly capable. The Saudi led air-war against Yemen which has created a humanitarian disaster, has not given Saudi any clear geo-political advantage. It has only further antagonised Iran and created bad publicity for Saudi among human rights activists in the west, including some left-leaning political figures like Jeremy Corbyn. Yet at the end of the day, Saudi’s misadventure in Yemen, which is privately criticised by many in the Saudi deep state, has done Saudi more harm than good, but at this juncture, such geo-political harm is mostly limited to Shi’a states in the Middle East.

While Saudi has been notorious for funding terrorism, this too has done little to weaken its Arab rivals, especially compared with decades of sustained Israeli aggression which has done far more to create instability and chaos  in the Arab world.

This is not to say that Saudi foreign policy is moral, ethical or well-intentioned, it is none of those things, but nor has it been particularly effective in the crucial long term perspective. This distinction is often lost in impassioned arguments over the Saudi regime’s tactics.

Finally there is another angle, expert journalist Pepe Escobar has written multiple pieces on the internal power struggle in Saudi. Much of this revolves around the battle between the young Crown Prince Mohammad Bin Salman (MBS) and the former next in line to the throne, Muhammad bin Nayef (MBN).

While MBS is the younger, more ambitious and by many accounts the more frivolous of the two rivals, MBN is considered the more ‘west friendly’ of the two princes. MBN is seen as someone who would have trudged along, preserving the status quo of Saudi having strong relations with the west, decent but ultimately second rate relations with China and limited relations with Russia. By contrast, MBN wants to diversify the Saudi economy, is said to have good relations with Russian officials, but more dangerously, also wants Saudi to have a more pro-active foreign policy.

This worries many ‘Russia watchers’, far more than it worries the Russian political class. Russia is all too aware of how mutual business interests and long-term respectful diplomatic communication can help reduce tensions between regional rivals to mere rhetoric. Turkey’s newfound defence of Syrian and Iraqi territorial integrity, has been as much because of Turkey’s economic reliance on Russia as it is because of Kurdish nationalism in the region. While Kurdish nationalism has angered Turkey, Russia’s partnership has assured Turkey that a balance of power will ultimately be maintained in the Middle East by the Russian geo-political superpower that Ankara has come to both trust and respect. In this sense, Russia’s stabilising hand offers most Middle East actors, a kind of unspoken but equally unambiguous insurance policy.

The Russian geo-political ‘insurance policy’ has also helped to bring Turkey and Iran closer together. Again, while Kurdish nationalism and Israeli aggression has mutually infuriated Ankara and Tehran, it was first and foremost, Russia’s friendship with both powers that allowed Iran and Turkey to develop a newfound sense of trust and mutually beneficial economic relations.

Turkish President Erdogan meets with Iran’s Supreme Leader Ali Khamenei to solidify partnership

Turning to the dispute between Riyadh and Doha, Russia’s genuinely neutral stance on the row between Qatar on the one hand and Saudi Arabia, the UAE, Bahrain and Egypt on the other, has earned Russia genuine respect on all sides of this conflict.

And then one has to necessarily turn to the Saudi/Iranian conflict. MBS is considered one of the more anti-Iranian figures in a Saudi state that is de-facto anti-Iran. While some ideologically motivated commentators think that the Saudi monarch’s visit to Moscow is a betrayal of the Moscow-Tehran partnership, this is no more the case than Russia’s increasingly good relations with Turkey has been a threat to Russia’s Syrian partner.

The slow-moving but increasingly obvious outcome of good Russian relations with Turkey has meant that Turkey is now playing a less destructive and detracting role in Syria.  While Damascus and Ankara still do not have official diplomatic channels, the fact that Damascus welcomed the Turkish policed de-escalation zone in Syria’s Idlib Governorate, is a sign of a small yet significant rapprochement, albeit via a third party.

Likewise, if both Iran and Saudi become increasingly intertwined in an economic partnership with Russia and also China, there will be less of a chance that Saudi would ever make good on its threats against Iran. Even now, the threats against Iran are mostly rhetorical as Saudi simply does not have the ability to even attempt to win a war against Iran’s superior armed forces.

In this sense, Russia is helping create stability in the Middle East by making previous and current rival nations into countries that each have an economic interest in a common partner. That partner is Russia which increasingly also means China, by extrapolation, as well as overriding realities of Chinese investment in the Middle East. There is only one nation that is one good to very good terms with nations as diverse as Iran, Saudi Arabia, Syria, Turkey, Iraq, Egypt, Qatar, Palestine, Israel and in many ways, event the notoriously difficult Lebanon. This country is Russia.

Just as Nawaz Sharif’s ouster from the Premiership in Islamabad has not negatively impacted Pakistan’s close economic and geo-political relations with China, so too would any would-be palace coup in Saudi, or any other Persian Gulf monarchy, not effect relations with Russia as much as some would hope or in other cases, fear. There is only so much that any ideological state can do to resist pragmatism. This far, Russia has quietly made sure that in all such states, pragmatic thinking beats out ideological rhetoric. Saudi Arabia is no exception, it in fact, proves the rule.