In his first trip to Moscow since becoming king in 2015, Saudi Arabia’s King Salman will reportedly begin a visit to Russia on October 5 where he will meet with President Vladimir Putin. Discussions are expected to include energy projects, oil prices and the situation in the Middle East.
During the visit Saudi Arabia and Russia plan to set up a $1 billion fund to invest in energy projects as part of efforts by two of the world’s biggest oil producers to expand cooperation, Reuters quoted Russian Energy Minister Alexander Novak as saying on October 2.
OPEC-kingpin Saudi Arabia and Russia helped reach a deal between the Organization of the Petroleum Exporting Countries and non-OPEC to cut output by 1.8 million barrels per day from January to lift crude prices.
“The new-found relationship resulted from Russia’s agreement to make a significant contribution to the Saudi-led initiative to cut oil supplies coming onto the world market last November,” wrote Chris Weafer, a senior partner at Macro-Advisory in Moscow. “That was certainly a key factor, especially since very few actually expected Russia to make any effort to comply, never mind to fully adhere to its commitment,” Weafer wrote in an emailed commentary contributed to www.intellinews.com on September 29.
But the developing relationship is broader than the specific oil deal, Weafer wrote, adding that both have much more to gain.
“In the Middle East and the Gulf, Russia has a good relationship with Egypt, Israel, Qatar and the United Arab Emirates (UAE). Saudi Arabia was the missing big piece in that jigsaw. It is notable, but hardly surprising, that since the announcement of the Russia-OPEC oil deal late last year there has been no criticism of Russia’s role in Syria from any of the Arab states. That is a perfect example of good business — Russia and Saudi both earn close to $2.5 billion per month more from exports at $54 oil than they would at $45 — and good politics,” Weafer wrote.
“King Salman does not do courtesy calls so it can be reasonably assumed that his first official visit to the Russian capital is a serious event and we should expect to hear of some substantial investment deals and/or a deepening of the political relationship,” Weafer wrote.
“The big projects are likely to be in the energy sector. Saudi Arabia lost its crown as the world’s biggest oil exporter to Russia several years ago as the latter has invested heavily in value-added processing in refineries and petrochemicals and is today the world’s biggest refined product exporter. Russia is also the world’s biggest gas exporter and, as the Novatek-Total Yamal project comes on stream, will become one of the world’s biggest liquefied natural gas (LNG) exporters. Saudi is still predominantly a crude oil exporter and needs to diversify, especially as the longer-term future demand for crude oil becomes increasingly uncertain in the age of electric engines,” Weafer wrote.
The Saudi shopping list is also thought to include nuclear power, defence and agriculture.