Russia’s Pivot to Saudi Arabia Could be More Valuable Than China

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Against the backdrop of the contentious agreement between Iran and the permanent members of the UN Security Council plus Germany (the P5+1), the signing of a deal between Russia and Saudi Arabia under which Riyadh will invest $10 billion in the Russian economy was overlooked. But this agreement speaks of a major reversal in Russian policy, perhaps no less important than the much talked about pivot toward China.

At the very least, the 4-5 year arrangement struck with Saudi Arabia is more concrete than the ambitious projects to lay gas pipelines to China.

“The deal with Saudi Arabia represents Russia’s biggest partnership and largest attraction of foreign capital in recent years,” said the general director of the Russian Direct Investment Fund (RDIF), Kirill Dmitriev. “Previously the largest investor in cooperation with the RDIF was the United Arab Emirates, which decided to invest $7 billion in the Russian economy.”

“Arab investors are coming to Russia at a time when everyone else is turning away,”writes Vedomostia respectful business daily. “Direct investments in Russia for 2014 amounted to $21 billion, and for the first time in many years the last two quarters recorded a net outflow.”

According to Dmitriev, seven projects with the Saudis have been earmarked, and ten deals are expected to be signed by the end of this year. Riyadh is particularly interested in infrastructure, agriculture, retail, healthcare and real estate.

Investments and Iskanders

“Until now Saudi ministers have been wary of us. But the personal contact between Saudi Crown Prince Muhammad bin Salman and President Vladimir Putin at the St. Petersburg Economic Forum had an effect on them,” said Dmitriev. Other Russian experts concur that for the Arabs, private arrangements between leaders are extremely important.

Putin has since made several phone calls to bin Salman. At the time the Crown Prince’s appearance in St Petersburg was a minor sensation. After all, Saudi Arabia is a key ally of the United States in the Middle East, and against the backdrop of continuing U.S. economic sanctions and the White House’s personal dislike of Putin, the visit could have been perceived in Washington as a kind of diplomatic demarche.

All the more so given that the major investment deal between Moscow and Riyadh was accompanied by talks on deliveries to Saudi Arabia of Russian-built Iskander air defense systems.

Russia’s readiness to supply Saudi Arabia with Iskander tactical missile systems was announced by Rosoboronexport Deputy General Director Igor Sevastyanov. In June a Saudi delegation visited the Army-2015 Forum in Moscow to negotiate their procurement. If Iskanders are indeed delivered to Saudi Arabia, it will throw down a gauntlet to Washington, which until now has enjoyed a monopoly on arms supplies to the kingdom.

Is Riyadh attempting to provoke America?

What lies behind these efforts to reenergize economic and political ties between the two countries? For a start, the Saudis are extremely displeased with the Iranian agreement, which U.S. President Barack Obama has so vehemently championed in defiance of critics inside the Republican-controlled Congress. It seems that in the not-too-distant future the Islamic Republic could turn from mortal enemy into major U.S. ally. No wonder Washington is keen to praise Tehran for confronting the Islamic State of Iraq and the Greater Syria (ISIS).

Meanwhile, the United States has totally opted out of the fight against the Iran-backed Houthis in Yemen; Saudi Arabia is effectively in charge of the military operation, albeit on a rather ineffective and limited scale with no boots on the ground.

Riyadh’s petroleum interests are also conducive to closer ties with Russia. The aim here is to solve the problem of low oil prices, but not in leaps and bounds: the Saudis want to achieve long-term growth and stabilization. And although there is no talk of any “conspiracy” between Saudi Arabia and Russia against U.S. production of shale oil, greater cooperation and coordination with Russia in the oil sector could one day theoretically result in the emergence of a robust union which, especially in light of Russia’s observer status in OPEC, could resist a new U.S. monopoly in the oil market and lead to higher energy prices.

In expanding cooperation with Riyadh, Russia, too, is playing a long game. Of course, Moscow’s primary interest is to break the shackles of global isolation and find new partners and allies to escape the vicious circle of international pariah-hood. But at the same time Russia, which has a long record of influence in the Arab world, seems ready to change its strategy in the Middle East. Not for nothing, say media reports, did President Putin himself phone his U.S. counterpart Barack Obama recently to discuss, first and foremost, Syria. No less remarkable was the reaction of the White House incumbent, who said that he was “heartened” by the call.

It is more than likely that the assumption amongst Western and Russian experts alike that Russia is ready to cooperate with the United States in the fight against Islamic fundamentalism is not pure fantasy. If indeed it is true, then this cooperation can be the force that pulls Russia and the West out of the vortex of a crisis that nobody needs. These expectations were strengthened by recent statements from Western politicians (including Obama himself) that, without Russia’s involvement, a deal with Iran would have been impossible.

Pivot to the Middle East

Pivot to the Middle East

Not all Russian experts are inclined to exaggerate the significance of the latest agreement with Saudi Arabia.

“To say that we have some kind of new alliance, that something is changing, is utter poppycock,” Russia’s top Orientalist Georgy Mirsky tells it in a straightforward manner. “It is as it always was. Russia has always enjoyed good relations in the Arab world, but never—at least since the departure from this world of figures like Gamal Abdel Nasser, Yasser Arafat and Hafez al-Assad—has there been reason to suppose that they could somehow give America the heave-ho in favor of Russia. That goes for others, too. They can’t do without the Americans.”

Nevertheless, the activation of ties with such a key regional power as Saudi Arabia should be seen as a positive development, especially considering the fact that Russia supports Iran and is ready to cooperate with the United States on Syria, although its potential abandonment of the Assad regime is still a moot point.

If Russia’s actions pay off, this new strategy could mark a real turnabout in the Middle East, and one that is far more solid and potentially richer in economic and political dividends than the global Eurasian integration promoted by Kremlin propagandists that assumes closer ties between Russia and China.

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