New horizons: Putin & Salman

New horizons: Putin & Salman
Russia and Saudi Arabia announced large investment dela and joint ventures to further cement relations. King Salman of Saudi Arabia arrived in Moscow on Wednesday; the first..

Russia and Saudi Arabia announced large investment dela and joint ventures to further cement relations. King Salman of Saudi Arabia arrived in Moscow on Wednesday; the first such visit by a reigning Saudi monarch.

Saudi has signed preliminary agreements to buy S -400 defense systems , Kornet anti –tank guided missile systems and multiple rocket launcers under the deal from Russia.

Saudi Arabia’s Public Investment Fund had in 2015 announced plans to invest $10 bn in Russia over the next five years, though only a fraction has been committed so far.

Background

Russia & Saudi ties

Russia – Saudi Arabia relations refer to the bilateral relationship between Russia and the Kingdom of Saudi Arabia. The two countries are referred to as the two petroleum superpowers, which together account for about half of the world's crude oil production and fiercely compete for market shares.

The first country to establish full diplomatic relations with the Kingdom of Hejaz and Nejd (the name of the Saudi state until 1932) was the Soviet Union. The relations began in 1926. However, relations cooled later on, with Saudi Arabia closing their legation in Moscow in 1938 and refusing to re-establish relations. Diplomatic relations were only re-established after the dissolution of the Soviet Union and the establishment of the Russian Federation. Despite a lack of relations, about 20 Soviet Muslims were allowed to annually make the Hajj from 1946 until 1990 when liberalization allowed thousands of Soviet Muslims to attend. Relations were strained in the 1980s by Saudi support for the Mujahideen during the Soviet war in Afghanistan and the close alliance with the United States.

Russian President Vladimir Putin met King Abdullah in Riyadh during a high level delegation visit on February 11–12, 2007. It was the first official visit for a Russian leader to the Kingdom. The visit was an opportunity for Moscow to improve its relations with Riyadh regarding various areas, including regional security issues, energy, trade, transportation, scientific cooperation and exchanges. King Abdullah's visit to Russia in 2003, as Crown Prince, was an opening in high level contacts between the countries which did not have diplomatic ties from 1938 until 1990.

After the 2008 Georgia-Russia crisis, King Abdullah said that he had the full understanding of the Russian side on the independence of Abkhazia and South Ossetia, however, Saudi Arabia did not recognize the two regions yet.

Syrian Civil War

Relations between the two countries became strained during the Syrian Civil War, in which Russia supports Syria′s president Bashar al-Assad while Saudi Arabia along with Qatar and Turkey supports the Syrian rebels.

In February 2016, Saudi Arabia offered for the first time to send ground troops to Syria; a Saudi official confirmed that Riyadh had sent warplanes to Incirlik Air Base in Turkey, a move considered as preparation for an incursion into Syria.

Analysis

The Council of Saudi Chambers (CSC) organized a networking meeting in Moscow on Wednesday for more than 100 Saudi and Russian CEOs to coincide with King Salman’s visit to Russia.

Ahmed Al-Rajhi, CSC chairman, said he hoped the meeting would boost commercial cooperation and investment between the two countries. He also called on the businessmen to set up joint industrial projects and find an effective mechanism for trade exchange — suggesting exhibitions, training courses and meetings as useful tools. He also said it was important to settle disputes that may arise between businessmen in a way that will be beneficial to both countries.

King Salman is scheduled to meet with Putin today. “The leaders will consider joint steps to further develop bilateral cooperation in the trade, economic, investment and cultural-humanitarian areas.”

The two leaders are also expected to discuss defense industry cooperation. Moscow and Riyadh have “broad prospects” for cooperation as the potential of bilateral relations between Russia and Saudi Arabia is “far from being fully unlocked.”

On Friday, the Saudi King will meet with the Russian Prime Minister Dmitry Medvedev to discuss some economic issues, including major infrastructure projects.

Russian Foreign Minister Sergey Lavrov believes that the King’s visit will become “a milestone event in our relations bringing our cooperation to a totally new level.”

“Our common objective is to increase our trade turnover and expand the commodity component of it, which – we both think – has yet to correspond to the significant potential.” The Russian diplomat also believes that the Saudi King’s visit to Moscow will contribute to the conflict resolution in the Middle East.

Riyadh and Moscow are jointly working on the implementation of OPEC-Plus agreements to reduce global oil production. OPEC and Russia are leading the effort to stabilize crude oil prices, which have more than halved since 2014. In May, they signed an agreement to cap oil production through to March 2018 due to increasing output from the United States. However, it did not stop oil prices from slumping.

On Wednesday, Putin said that he believes that the agreement on the oil cuts between OPEC and non-OPEC countries could be prolonged, so that the deal would potentially be extended beyond March 2018.

Assessment

Our assessment is that as the leaders of the world's two biggest oil exporters, King Salman and Vladimir Putin are expected to agree to further strengthen measures to stem the drop in the global price of fossil fuels in the meeting today. We believe that the recent visit  by number of  leaders from this region including those of Eygypt, Jordan, Saudi Arabia, Israel, Turkey to Moscow is indicative of the changed geo political landscape. It is alluding to the reemergence of Russia as the new super power and the US perhaps a declining one. We feel that  the countries realize the importance of foussing on common grounds – both have been hit by the fall in oil prices since 2014.

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