2018-02-15 

How Washington helped breaking the deadlock between Riyadh and Moscow

From London, Saad Al-Saad

The low temperatures, which have reached below 30 degrees Celsius near the Arctic, could not dissuade the two leaders from tossing aside their gloves and shaking hands in a scene that shows the strength of the Saudi-Russian ties and cooperation as well as the strong relations between the Saudi Energy Minister Khalid al-Falih and his Russian counterpart Alexander Novak.


The Financial Times reported that this was when al-Faleh arrived at Russia's northernmost port of Sabeta to open a $ 27bn liquefied natural gas plant with his Russian counterpart Alexander Novak and President Vladimir Putin.


Putin said to his guest, "Buy the Russian gas and save your oil” to get the answer from al-Faleh: "That's why I am here." 

This scene summarizes the present and the future of the Saudi-Russian relations. "We have a great relationship with Novak, we have become partners," al-Faleh said.


 The agreement in December highlights how Russia and Saudi Arabia have over the past 18 months managed to form an effective alliance in energy, despite being on opposing sides on other issues such as the Syrian conflict.


 The report points out that the traditional rivals, which combined produce one fifth of the world's crude oil, now speak in a unit of voice on energy issues and take their relations to a strategic level. 


The report adds that the attempt to reduce the seriousness of the US shale oil revolution, is one of the main reasons for the convergence that was unthinkable a few years ago between Moscow and Riyadh.

 The rapprochement between the two countries is also due to the strong friendly relations between Crown Prince Mohammed bin Salman and Russian President Vladimir Putin, as well as between al-Faleh and Novak.

Speaking to the Financial Times, the Saudi Energy Minister said that the Saudi-Russian alliance "has the potential to become one of the strongest energy partnerships in the world."

 Cooperation between Saudi Arabia and Russia has gone beyond Opec's deal to deeper engagement, including proposals for joint ventures, investments and military deals.


 “The strength of the economic partnership between the two countries will help bring confidence and trust," al-Faleh said. "We invest in Russia. And the Russians are also interested in investing in the kingdom." 

 

This comes after the sovereign wealth fund earmarked 10 billion dollars to invest in Russia, while the Moscow-based funds look at Saudi Arabia as an attractive future investment market.

 

The two countries have established a joint $1bn tech fund and have identified areas of collaboration to include research and development. 


Novak told the Financial Times: "The economies in both countries are very much alike in terms of intention and diversification efforts, and these are steps towards the development of the high technology sector."

  

 The report points out that the cooperation, alliance and partnership between Moscow and Riyadh comes after decades of stalemate and fragility. In the past, the relationship was characterized by mutual mistrust and doubt about energy policy, especially geopolitics, given Saudi’s historical cooperation with the United States. 

The report adds that Riyadh today has a strong partner to help it achieve balance and stability of oil markets against its historic ally, which threatens the recovery of oil markets and prices, where the production of shale oil is forecast to grow in the United States at a record rate this year, that over takes the Saudi and the exceeds the Russian production, which remains the world's largest producer of oil. 

 

While some oil market observers have concerns that the increase in the US production surge might offset the impact of curbs procedures led by Riyadh and Moscow, the new-found allies have played down the impact of US shale, saying it will not be enough to meet future energy needs. While al-Faleh confirmed that " there is going to be an increasing demand, and this is the context in which we shall consider the growth of oil shale production”.

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