Putin’s Power Play: Saudi-Russian Oil Deal Leads To Bigger Russia Role In The Middle East
“Saudi Arabia’s oil production agreement with Russia was opportunistic at first; but, it is now the foundation for a broader arrangement that has the potential to reduce already waning U.S. influence in the Middle East,” wrote Ms. Patti Domm in an article posted on this afternoon’s (March 5) CNBC website.
“It was the United States, ironically, that drove Russia and Saudi Arabia together in the first place,” Ms. Domm wrote, “with the surprising rise of the oil sector that is now producing record-high volumes, last seen in 1970. With the cut in Saudi production, and the U.S. still-growing output of 10 million barrels per day, is now more than Saudi Arabia, and is catching up to number one producer, Russia.”
“What I think is brilliant about [Russian President Vladimir] Putin is there is an immediate imperative to get this done because of U.S. production; but, I think Putin understood the opportunity was there for Russia to take a role OPEC,” said Helima Croft, RBC of Global Commodity Strategy. “He leveraged it to expand Russia’s regional influence.”
Georgetown University Professor Angela Stent said “it may be that Saudi Arabia believes Russia could help it with Iran, which it fears will develop nuclear weapons; and, is on the opposite side from Saudi Arabia in a proxy war in Yemen.”
“I think the Saudis are in this for geopolitical reasons; and even though [POTUS] Trump went to Saudi Arabia, and it’s supposed to be this great relationship, the Saudis are casting around and realizing Russia has taken up for a lot of slack for the U.S. in the Middle East,” said Stent, who is the Director for the Center for Eurasian, Russian, and East European Studies, and a Professor in the Department of Government, and the School of Foreign Service.
Russia Fills A Void
Croft said “the U.S. has left a vacuum, with its shifting Middle East policies. I think our Iran policy, what happened in Syria, they did not think the U.S. was a stalwart. Then you have the Russians. They were willing to be more transactional with them,” Croft said.
“Right now, Russia and Saudi Arabia’s relationship is becoming thicker than oil,” Croft said. As for the Saudis, “I think they see themselves as trying to show the Russians they have a better friend in the Middle East (than Iran.”
“The United States began to particularly wavier on Middle East policy in the past five years,” Ms. Domm wrote. “It was certainly diminishing under [POTUS] Obama [more like evaporating],” Stent said, “pointing to the 2013 comments by Obama that if Syria crossed the Red Line of using chemical [weapons], the U.S. would act. But, the U.S. did not.”
“Meanwhile, the Saudi/Russia partnership is progressing, with state-owned Saudi Aramco reportedly making an investment in a Russian Arctic, liquefied natural gas project; and, the Russian Direct Investment Fund expected to invest in the Saudi Aramco’s [upcoming] IPO,” Croft noted.
“I think it is a strategic alliance when it comes to energy that could well extend to other things,” Ms. Domm wrote. The two countries, “in the past, have discussed military matters and potential arms deals; as well as Riyadh investing in Russia. It’s not just purely an energy relationship. It’s more of a strategic political relationship that started on energy reform,” said John Sfakianakis, Director of Economic Research, at the Gulf Research Center in Riyadh.
Ms. Domm adds, “the agreement between OPEC, led by Saudi Arabia, with Russia and other producers is expected to run into 2019; but, it could be up for discussion when OPEC meets in June. Saudi Arabia’s Energy Minister Khalid al-Falih, has said the deal will be reviewed next year for possible changes; but, Russian companies [oil producers] have been eager to increase production.”
“Going forward, this arrangement has to hold. It needs to remain for quite some time, so oil prices remain at this range of $60ish for some time,” Mr. Sfakianakis said. “It suits everybody, especially the producing countries – $60-$65 is a good price from the $30 we had a couple of years ago. It helps everybody. It keeps the balance of payments in good order. My take is, this arrangement will hold, at least for the rest of the year, and then we’ll see what they do.”
Saudi Arabia’s Diversification Plan
“The pact came at a strategic moment for Saudi Arabia, which is trying to transform itself into a country with a much more diverse economy,” Ms. Domm wrote. Thus, “a stronger oil price is helpful.
Some Other Thoughts/Observations
The closer relations between Riyadh and Moscow is not really surprising. What the CNBC article failed to acknowledge is that the Saudi leadership not only did not trust POTUS Obama, they despised him as weak and feckless. And, the cratering of U.S. strategic influence began early in POTUS Obama’s first term when he failed to provide any kind of support to the Iranian populace when they rose in opposition to rigged elections in the country. Then, POTUS Obama and his national security team, gave Egyptian President Siisi a ‘stiff-arm’ and prompted Egypt to move closer to Russia. Then of course, there was the infamous Obama Red Line in Syria/Assad, which faded to White; and, was a devastating blow to U.S. prestige — not only in the Middle East; but, across the globe. Vladimir Putin seized the Crimea, and increased its pressure on their former Soviet republics, while China began building artificial islands in the Pacific and militarizing them, as well as imposing an Air Defense Identification Zone near the disputed islands in the South China Sea. Iran stepped up its harassment of U.S. naval vessels in the Persian Gulf; and, even seized two U.S. naval patrol boats, along with U.S. sailors. Tehran gained maximum propaganda benefit by humiliating and parading our naval personnel on live media in the Middle East for all to see. As a whole, these incidents painted a very bad picture for the United States. Our allies no longer trusted us; and, our adversaries no longer feared us. The Trump national security team had been left with a strategic mess; and, had to immediately address the cratering of U.S. prestige across the globe.
Last October, King Salman became the first Saudi monarch to visit Russia; and Putin wasted no time in hailing the visit, calling it a “landmark event.” As Anna Borshchevskaya wrote in the October 10, 2017 edition of Foreign Affairs, “after the summit, Salman and Putin signed a packet of documents on energy, trade, and defense, and agreed to several billion dollars’ worth of joint investment. Saudi Arabia also agreed to purchase Russia’s S-400 air defense system, making it the second U.S. ally to do so (with Turkey being the first).
Clearly, Saudi Arabia is hedging its bets. That said, POTUS Trump’s first overseas visit was to the kingdom, which is reflective of the fact that the Trump national security team desired to halt the cratering of U.S. influence and prestige in the country and the region. The warming of relations between Moscow and Riyadh isn’t likely to deepen much more, as both countries are likely to ‘handle’ this relationship with ‘kid gloves.’ Nonetheless, this ‘new’ relationship is a direct consequence of the Obama administration’s weak and feckless strategy of ‘Strategic Patience,’ which translated meant either do nothing, or ‘lead from behind.’ Thankfully, we now have a POTUS and a national security team that ‘get’s it,’ and, is letting their actions speak volumes — that the U.S. has gotten its mojo back. RCP, fortunascorner.com