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Analysis: The bear lay down with the camel

By ARIEL COHEN, Special to UPI   |   Sept. 9, 2003 at 6:03 PM   |   Comments

WASHINGTON, Sept. 9 (UPI) -- Geo-economic tectonic plates have shifted as the de-facto ruler of Saudi Arabia, Crown Prince Abullah has completed his visit to Russia last week. Oil, weapons and geopolitics drive the two countries' newly found common agenda.

Saudis recognize that Russia, as the largest producer of oil outside of Organization of Petroleum Exporting Countries (OPEC), and the largest producer of natural gas, and the second largest exporter of oil, packs a lot of punch in the global energy markets.

While the U.S. is interested in diversifying its energy supply to include Russia, Saudi Arabia wants its own direct energy dialogue with Moscow.

"Clearly, over the past two-three years, Russian influence in the world oil market has rison dramatically -- in proportion to its growing production, and the visit of Prince Abdullah is a reflection of that," says Stephen O'Sullivan, the head of research for United Financial Group investment fund, based in Moscow.

Russian oil exports have grown at 8-10 percent a year since the financial crisis of 1998. Its increasing oil market share has started to worry the Saudi kingdom. Riyadh traditionally considered itself the market-maker of energy and wants others to follow. It is also worried that the more efficient Russian private sector oil model may become contagious. The Saudi royal family would like to keep controls of the "spice".

The five-year oil-and-gas cooperation agreement signed in Moscow by the two energy ministers, Igor Yusufov and Ali al Naimi, will allow the two fuel giants to coordinate supply of oil to the global markets.

Russia will not even need to join OPEC, although U.S. State Department sources told UPI that Washington "will not be excited" if Moscow considers joining the cartel.

Saudi Arabia, which suffered from a budget deficit of 3.8 percent of GDP in 2001 is vitally interested in high oil prices ($26-28 a barrel), and would like to coordinate supply with Russia. Moscow repeatedly stated that it will be comfortable with somewhat lower oil prices -- $20-25/barrel).

But there are reasons beyond influence in energy markets, which drive Russo-Saudi relations.

No longer sure of its prior close relationship with Washington, the Saudi monarchy is reaching out to the former empire it helped America to defeat in Afghanistan only 15 years ago.

In the aftermath of the Iraq war, Riyadh is looking to balance U.S. influence in the Persian Gulf. It also hopes to diversify its sources of weapons, and signals to Washington that it keeps all geopolitical options open.

Russia, the third largest weapons exporter after U.S. and Great Britain, leads the word in the number of large weapons systems, like tanks and aircraft, sold. Its military sales topped $6 billion in 2002, according to the Stockholm-based International Peace Research Institute.

In the 1990s, Russia sold $4 billion, state-of-the-art multi-layer air defense system to the United Arab Emirates, and would like to open the large and lucrative Saudi weapons market to its rusting, but once-formidable arms industry.

Moscow, on its part, is driven towards a partnership with Saudi Arabia for a combination of geopolitical and geo-economic reasons. It is looking to compensate itself for the loss of influence in the Gulf with the demise of Saddam Hussein, the old Soviet client.

Russian companies connected to Moscow high-flying insiders used to do brisk business -- up to $1 billion a year -- in Iraqi oil under the U.N.-sponsored oil-for-food programs.

Russia's traditionally warm relations with other secular Arab countries, Syria and Libya, have stagnated for years. While Damascus has no cash to pay for Russian weapons, Riyadh has plenty. And Russian energy companies, flush with cash, are looking for joint ventures in the Middle East, including in Saudi Arabia.

The desert kingdom is also a perfect partner for giant natural gas development schemes under the umbrella of Prince Abdullah's much-touted "gas initiative", which would include power generation, liquid natural gas (LNG) production for export, and gas-powered desalination.

Most importantly, though, Moscow believes that Saudis and other rich Gulf states keep the keys to the 9-year-old war in Chechnya.

One of the most radical and audacious Islamist commanders in Chechnya, known by the nom-de-guerre of Hattab, was a Saudi. The Russian special forces killed him after a long hunt. Another top commander, Shamil Basaev, on the U.S. Department of State terrorism list, is known to have military and financial support from the Gulf, as well as a flow of jihadi recruits.

During the horrific hostage taking in October of last year, the Russian security services alleged in the media that the Chechen suicide bombers who took 1,000 people hostage in a Moscow theater made phone calls to the Gulf. Their commander, they said, has negotiated to make a "snuff movie" for a rich Gulf sponsor, of hostage executions -- for $1 million.

The Kremlin was livid. In the last summit with President Bush in St. Petersburg in June, President Putin stressed that 15 out of 19 hijackers were Saudi. President Bush nodded in agreement. This was an intentional jab to signal to Saudi Arabia that Russia is willing to join forces with the United States in prosecuting the war against terrorism if the Saudis don't reign the radical Chechens in.

Al Qaeda's terrorist attacks in Riyadh, in which over 30 Saudis died, seemed to have change the tone in the desert kingdom. Now Saudi leaders claim that they view Chechen separatism as an internal Russian affair, and that their assistance was always exclusively humanitarian.

While nobody in Moscow believes that, the Putin Administration, which is facing parliamentary elections in December and presidential elections in March 2004, is hoping for the drying up of financing to terrorism, and a significant decrease in hostilities.

Things between Moscow and Riyadh were not always so cheerful. Saudi Arabia, scared of the Soviet expansion in Yemen, Somalia, Ethiopia and Afghanistan in the 1970s, paid billions of dollars and sent thousands of moujahedeen to fight the Soviet Union in Afghanistan in the 1980s.

Riyadh also crashed the oil prices, denying Leonid Brezhnev, then-Soviet General Secretary, his principal source of foreign cash. That conflict, that brought Riyadh and Washington to the pinnacle of their friendship under President Ronald Reagan, allowed the Saudis to propagate the Wahhabi school of Islam worldwide, and hastened the demise of the Soviet Union.

Even prior to that the Russian-Saudi relations knew their ups and downs. The Soviet Union was the first state to recognize the desert Kingdom of Hijaz in 1926, hoping to upset the British Empire. In the great purge of 1937 Stalin, however, recalled the Soviet Ambassador and got him shot.

Dr. Sergey Karaganov, the Chairman of the Russian Council on Foreign and Defense Policy, and a consultant to the Russian government and to energy companies, was instrumental in bringing Prince Abdullah to Moscow. Karaganov told UPI that the visit was "very productive". This means Saudi-Russian cooperation both on energy and on Chechnya.

As Moscow and Riyadh discover their newfound common agenda, and pursue cooperation, the bear-and-camel rapprochement demonstrates the old adage: countries do not have permanent friends. They only have permanent interests.


Ariel Cohen, Ph.D., is a Research Fellow at The Heritage Foundation

© 2003 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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