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Why the Gulf crisis could benefit Russia

Maybe for the first time in decades, Russia finds itself enjoying good relations with all the Gulf states, including Iran and Iraq. Moscow’s calls for a peaceful resolution of the Gulf crisis through dialogue clearly reflects this neutral position.

But the Gulf crisis may have a positive impact on Russia in many ways, and could provide it with more opportunities. Indeed, the original ancient Greek word “crisis” also translates into opportunity, or as British leader Winston Churchill once said: “An optimist sees the opportunity in every difficulty.”

 

Opportunistic US

The contradictory and opportunistic attitudes of the US administration have sounded the alarm in many capitals worldwide. This may push several of Washington’s allies to hedge politically and diversify their foreign policies, including developing relations (as well as arms deals) with Moscow.

Meanwhile, improving Turkish-Russian relations, accompanied by progress in Gulf-Russian ties, may lead to positive trends in Syria. There are those in the corridors of power in the Gulf states and Turkey who see Russia’s presence in Syria as a counterbalance that ensures it does not become a vassal state to Iran.

Russian Foreign Minister Sergey Lavrov recently said: “I would not say we have some insurmountable differences on a Syria settlement.” Russian International Affairs Council (RIAC) Director General Andrei Kortunov went further, saying: “The Russian-Turkish-Iranian partnership does not guarantee a settlement of the Syria problem, which can hardly be resolved without Arab countries.”

 

Growing GCC investments

Russia’s combined trade with the Gulf Cooperation Council (GCC) member states accounted for less than 1 percent ($2.51 billion) of the country’s total trade with the world ($467.1 billion) in 2016. Yet it accounts for about 26 percent of Russia’s total trade with the Middle East ($9.73 billion), according to the latest data from the International Monetary Fund (IMF).

But despite the volume of trade between the Gulf and Russia being modest, Gulf investments have begun to flow significantly into Russia. According to BMI Research, foreign direct investment (FDI) inflows into Russia climbed to $33 billion in 2016, driven by capital repatriation and the acquisition of a 19.5 percent stake in Russian oil giant Rosneft by the Qatar Investment Authority (QIA) and the Swiss mining company Glencore.

The improvement in Russian-Gulf relations has begun to impact global oil markets. Russia and Saudi Arabia, the world’s top oil producers, joined forces twice in the past year to cut production to lift prices.

Dr. Naser Al-Tamimi 

Joint Russian-Saudi projects totaling about $600 million and projects worth $3 billion should be launched by the end of this year. Russia and Saudi Arabia also agreed an arms deal this month valued at $3.5 billion, which reportedly could be finalized during King Salman’s possible visit to Russia.

The UAE and Russia are jointly building a fifth-generation jet fighter after a deal announced at the International Defense Exhibition and Conference, Abu Dhabi, in February. Importantly, Arab states are also interested in Russian nuclear technology and expertise, as discussions are underway with several countries in the region, including Saudi Arabia.

 

Diversifying energy sources

The improvement in Russian-Gulf relations has begun to impact global oil markets. Russia and Saudi Arabia, the world’s top oil producers, joined forces twice in the past year to cut production to lift prices.

Meanwhile, the Gulf crisis has reminded energy-consuming countries, such as China, India, Japan and South Korea, that the stability of the region could deteriorate at any moment. This may push these countries to widen their diversification strategy, giving Russia a golden opportunity to penetrate these important markets even further.

That said, for countries, such as Japan, South Korea and even India, relations with Moscow are partly to hedge against China. But the Gulf crisis could further encourage Asian buyers to include more Russian liquefied natural gas (LNG) and oil for diversification reasons.

As for China, Russia enjoys a significant geographical advantage over the Gulf countries. Russia is planning to nearly double its oil exports to China via its only direct pipeline next year, as it is expected to begin pumping nearly 30 million tons of crude per year, or more than 600,000 barrels per day.

The Islamic factor cannot be ignored by Moscow when dealing with GCC states. Muslims comprise more than 15 percent of Russia’s population, and 90 percent of them are Sunni. Good relations with the Gulf states and the wider Muslim world, as well as finding a political solution in Syria, could help Russia improve ties with its Muslim minority and bolster efforts by Moscow to combat what it sees as growing extremism among Russian Muslims.

 

Dr. Naser Al-Tamimi is a UK-based Middle East researcher, political analyst and commentator with interests in energy politics and Gulf-Asia relations. Al-Tamimi is author of the book “China-Saudi Arabia Relations, 1990-2012: Marriage of Convenience or Strategic Alliance?” He can be reached on Twitter @nasertamimi and e-mail: [email protected]