Russia-Saudi FDI and U.S. Sanctions – Part II
Russia’s Foreign Minister Lavrov declared: “We support UN Security Council resolution 2254” – Content of the UN SC Resolution 2254. As previously mentioned, Russia will leverage Saudi Arabia in Syria.
This means that Assad will remain in power, but will share the new Syrian government with representatives of: Al-Qaeda, ISIS, FSA, Ahrar Sham and Jaysh Al-Islam. Thus, the Alawite will have less power and Sunni more power. The result will be a Lebanon’s Taef-like outcome, so that Russia:
- Can circumvent US sanctions, as I previously predicted.
- Iran is weakened by giving Sunni more power. This was planned since months, that’s why Hezbollah and Iran approached Sunni governments (excluding Saudi).
- See my previous report below on possible geopolitical alliances and cartels.
- Anbar, Iraq: See my previous report.
- My analysis on Idlib and Badiya Russian strike: See my previous report.
- Deal between Russia, Jordan, Israel was struck since Feb 2017, delegated to Macron. Excerpt of my full report and analysis:
I defined two current axes: Russia-Germany-Turkey-Kurdistan-Saudi (RGTKS) and Russia-France-Iraq-Iran-Lebanon (RFIIL). But a third emerging powerful axis is possible: The US-SDF-Kurdistan-Qatar. The most recent events showed that US was incapable of breaking ranks of European countries.
Will Kurdistan’s independence completely shift policies in the Middle East? Only if Kurdistan is not on Russian axis and is re-positioned by US away from Russia. I will tackle this subject in the light of the Saudi shifting policies.
A Different Russian-Saudi Arabia Relationship
This time Russia-Saudi Arabia’s relationship is different from past approaches on all scales:
- Diplomatic relationships between both countries were frozen from 1938 till 2003. In 2015 ties began to develop, but this is the first official visit of Saudi King Salman to Russia. Putin once visited Saudi in 2007. PS: FDI 2015 had different circumstances than FDI 2017.
- Aramco-Rosneft are primary key-players at FDI. In June 2017, Financial Times reported that: “Gazprom is in advanced talks with Aramco about possible sharing of drilling technology.” This was a sign that cooperation between Russia and Saudi Arabia on energy policy could soon be replicated at the company level.
- Other projects to be concluded include: the petrochemical, energy, infrastructure (air, land, sea industry) and other industrial sectors.
- Trade between both countries has been prospering. The volume increased from $235 millions in 2005 to $926 millions in 2015. Saudi Arabia’s exports amounted $155.3 millions, while imports from Russia were at $770.7 millions.
- During FDI 2017, Saudi culture, folklore, cinema will be introduced to the Russian public and discussed. FDI guests will be even able to take a virtual tour into a reproduced Saudi city via VR-technology. This indicates toward a different kind of relationship: A relationship based on respecting “Wahhabi” Saudi Arabia and promoting it as a “civilized” country adequate for a partnership.
- In an observation of the Kremlin propaganda state’s media tendencies, a U-Turn toward Saudi is noticed. Saudi was previously permanently under indirect media attack. Not to mention, that a totalitarian state like Russia has a one-sided media. This means, it has a coherent and coordinated diffusion of information backing the government, its goals and its elite tycoons.
- Putin’s political genius relies on proxies such as Iran and Hezbollah to attack Saudi Arabia, while he plays the savior and negotiator.
Is a Cartel possible?
So far, there is no indication toward building a cartel between Saudi Arabia and Russia, because of the RFIIL-axis and its conflict of interests. Additionally, there are other factors which could prohibit a cartel:
- Nord Stream 2 gas pipeline with Germany was approved in April and will cost about $12 billion. The financing is a shared investment of 50% through European countries and 50% through Gazprom.
- The recent Head of UNIFIL Beary dispute with US Haley and Israel was in favor of Moscow. This indicates toward an internal UN dynamic dealing differently with the Middle East than previous decades. It empowers Kremlin’s position.
- Macron’s double-games leverage France, benefit Russia and the markets of EU countries. Macron’s green light from Jordan to accept Assad led to creating a safe-zone in South Syria along Jordan-Israel-Syria border. Iran signed deals with Total France as well as other companies, thus the alternating French statements below, highlight Macron’s potential role and the extension in building the RFIIL axis:
- attacking the Kremlin and simultaneously being a medium for US-Russia negotiations,
- rejecting and accepting Assad,
- meeting Lebanon’s Aoun and reinforcing Assad,
- French companies are investing in Lebanon’s oil and gas.
- Qatar is in a weak position between both axes.
- The Turkish Stream gas pipeline, which will cost about $13 billions urged Turkey to protest possible EU sanctions against Russia and condemned US sanctions.
- These US sanctions and its presence in Syria and Iraq complicate Russia’s and Europe’s strategic economic decisions. Yet the following must be observed:
What the FDI 2017 means
At FDI a common Russian-Saudi fund worth 10 Billion dollars will be created, financed from Russia’s Direct Fund and Saudi’s public investment fund. This will consolidate Russia’s leading status in the energy market and the incapability of US to marginalize and isolate it, despite sanctions and boots in Syria and Iraq.
Moreover, talks between both countries are in their last stage at FDI. Through this fund, Saudi is giving Russian companies access to invest inside Saudi Arabia and other countries in the field of petrochemical, energy, transportation, agriculture and other industries. The agreements are made between the governing rulers of Russia and Saudi Arabia, thus Russian companies within the ruling mafia will get the contracts. It is obvious that Saudi is helping Russia circumvent US sanctions and enabling its companies (Putin gov-linked companies) to invest in several countries under the cover of an FDI fund.
Conclusion: Russia gave Iran a slap in the face but Saudi is naive to believe Russia can be trusted. And surely no one should underestimate US which still has lots of cards to play.
Joumana Gebara — President, CEO at MidEastAnalyst and Senior SME Analyst at MEA Study and Strategy Center.
Disclaimer: This article first appeared on Linkedin on October 1, 2017 and on MEA Studies on October 3, 2017