King Salman’s visit to Russia opens the door

Investment deals, oil market bonhomie and the Syrian war will dominate landmark talks between the leaders of Russia and Saudi Arabia on Thursday that are set to solidify a deepening relationship between the two energy powers. A delegation to Moscow, led by King Salman bin Abdulaziz, will sign more than $3bn worth of deals between Saudi and Russian energy companies, officials said.

It is the first trip to Russia by a Saudi monarch and reflects a new-found friendship between the world’s largest crude exporters that underpins a global agreement which has helped prop up oil prices.  A relationship previously marked by mutual distrust has been replaced during the past year by strategic co-operation bound by economics, trade and geopolitics.

Ties between the countries have warmed as Moscow’s relations with the west have deteriorated, and as its influence in the Middle East has risen following its intervention in the Syrian conflict. 

“Previously, our relations with Saudi Arabia used to be just on the surface, but right now they are developing rapidly,” Russian president Vladimir Putin said on Wednesday. “There is very good potential, and we are looking ahead with confidence, both with Saudi Arabia and the Middle East in general.”

The linchpin of the friendship is a deal struck in December last year by Moscow and Riyadh for a cut in crude production by Russia and the Saudi-led Opec cartel, which helped drag the oil price up above $50 a barrel, easing pressure on both countries’ oil-dependent budgets. 

Alexander Novak, Russia’s energy minister, said that there was “a large pipeline of co-operation projects to be discussed far beyond our joint [oil market] stabilisation efforts”. The talks between Mr Putin and King Salman will also focus on Syria, where Moscow and Riyadh have backed rival sides in the conflict, and the wider Middle East.

"The energy deals are one component of wider Russian-Saudi bilateral relations where they seek to not only co-manage the oil market but also co-manage the Middle East from a geopolitical stand point," said Helima Croft, RBC Capital Markets’ global head of commodity strategy. 

Moscow’s military intervention to back Syrian president Bashar al-Assad two years ago swung the civil war in favour of his regime, but also aligned Russia with Iran, Saudi Arabia’s arch-rival. That has unsettled Riyadh, which was one of the early backers of rebels fighting to oust Mr Assad and fears that Iran is expanding its influence across the Arab world.

King Salman is likely to seek assurances from Mr Putin on the Islamic republic’s future role in Syria, where Tehran has sent troops and backs foreign Shia militia fighting alongside the Assad regime. “My sense is that the Saudis are willing to concede on Assad remaining in power if Moscow can work to contain Iranian influence in Syria and elsewhere,” said Mark Katz, a politics professor at George Mason University in the US.

“It is not clear to me, though, that Moscow is in a position to do this. The Saudis are willing to do business with Moscow if it moves away from Tehran.” While Moscow’s pragmatism is influenced by the trade and investment benefits offered by the kingdom, Ms Croft said Riyadh was using the energy relationship to lock in a new strategic backer.

Crown Prince Mohammed bin Salman, who is leading efforts to overhaul the Saudi economy and pursuing a more assertive foreign policy, has spearheaded the new relations with Russia, analysts said. "It gives him another powerful friend, and a counterweight to the US," Ms Croft said. Mr Novak said the more than $3bn worth of deals included a $1bn joint energy investment fund, a $150m Saudi investment in Russia’s Eurasia Drilling Company and a $1.1bn deal for Russian petrochemical company Sibur to build a plant in Saudi Arabia.