Russia-Saudi Rapprochement?

Russian President Vladimir Putin visited Saudi Arabia on Monday. During the visit, the two sides signed numerous agreements, most notably on oil and investment. Even as Moscow and Riyadh differ in their policies toward Syria and Iran, they continue to pursue cooperation where it suits their economic and strategic interests.

During Putin’s visit, Russia and Saudi Arabia concluded 21 intergovernmental and commercial agreements, with 20 more signed before his arrival. Among them was a charter formalizing an indefinite extension of the OPEC+ super-cartel, which Moscow and Riyadh forged in 2016 to boost oil prices after the U.S. shale boom triggered their collapse.

Under the charter, however, OPEC+ output decisions are non-binding. Riyadh, which needs to keep prices oil prices high, pushed for binding terms. But Russia, whose break-even price is relatively low and whose top oil company, Rosneft, fears losing market share, insisted otherwise. For Moscow, this preserves flexibility while reinforcing its dominant role in an institution that has buttressed the Russian economy and enhanced its geopolitical clout.

In the long run, divergent market interests may limit Russian-Saudi cooperation in OPEC+. For now, though, they seem satisfied. At the summit, both Moscow and Riyadh averred their desire for long-term cooperation in OPEC+, with Russian Energy Minister Alexander Novak declaring they would “take that agreement to the next level, which is the highest level.”

Beyond oil, Monday’s summit also focused on boosting bilateral trade and investment. During the inaugural meeting of the Russian-Saudi Economic Council, Putin praised bilateral trade growth of 15 percent in 2018 and 38 percent (so far) in 2019. The parties also agreed to boost mutual agricultural and food exports, building on a recent Saudi decision to allow imports of Russian wheat, something long sought by Moscow.

Another highlight of the summit was the Russian-Saudi Investment Forum, attended by over 300 top Russian and Saudi executives. The parties signed agreements and memoranda of understanding for over $2 billion of Saudi investment in Russian sectors including energy, infrastructure, aerospace, agriculture, transportation, and artificial intelligence. These agreements add to the over $2.5 billion of Saudi investment already approved since 2015, when the Public Investment Fund, a Saudi sovereign wealth fund, pledged a total of $10 billion toward a partnership with the Russian Direct Investment Fund (RDIF), its Russian counterpart.

RDIF also announced shortly before Putin’s visit that it had opened its first foreign office in the Saudi kingdom. The new office will cooperate with Saudi partners through “ongoing agreements and platforms” such as the Russia-Saudi Investment Fund and additional funds geared toward investment in Russia’s energy and technology sectors. The latter were established when King Salman visited Moscow in 2017, a major milestone in Russian-Saudi relations that resulted in over $5 billion worth of – albeit mostly still unimplemented – trade, investment, and arms deals, including for a prospective Saudi purchase of Russia’s S-400 surface-to-air missile system. If realized, that acquisition could cause major friction between Riyadh and Washington.

Many of these investment deals have yet to materialize, to Moscow’s great frustration. Still, Moscow continues to emphatically praise its ties with the kingdom. “Russian-Saudi relations have reached a “qualitatively new level,” declared Russian Foreign Minister Sergei Lavrov after the summit. Putin went further, proclaiming Riyadh “Russia’s leading partner in the Arab world.”

Russia continues to make inroads in the Arab world, seeking to erode U.S. influence and to secure economic and geopolitical gains. Riyadh would represent a major prize. But Saudi Arabia has not abandoned its alliance with the United States. If anything, it is hedging its bets, while pursuing Russian cooperation in the oil market. If Washington wants to frustrate Putin’s advances, it must continue to counter Iranian aggression in the region. This is Riyadh’s top priority and the primary drag on its relations with Moscow, which continues to work with Iran and its regional clients. So long as this dynamic persists, Saudi Arabia will remain in the American orbit, even as it does business with America’s competitors.

John Hardie is research manager and Russia research associate at Foundation for Defense of Democracies (FDD), where he also contributes to the FDD’s Center on Military and Political Power (CMPP). Follow FDD on Twitter @FDD and @FDD_CMPP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.