Russia, Saudi Arabia Announce Billons In Energy, Military Deals, During Historic King Salman Visit

Two days ago, when we previewed the first ever visit by a Saudi King to the Russian capital - a move which prompted Bloomberg to call Russian president Putin the "new master of the Middle East" - we pointed out that according to Russian Energy Minister Alexander Novak, a joint Russian-Saudi fund to invest in the energy sector will be announced during the forthcoming visit of the Saudi King to Moscow, and that the preliminary agreement to establish the $1 billion fund has already been reached.

Fast forward to today when diplomatic history was made on Thursday, when Putin met with the King of Saudi Arabia Salman bin Abdulaziz Al Saud - the first state visit to Russia by a reigning Saudi monarch - and the launch of a new level of relations between the countries, as well as billions in new energy-focused deals (for more on the strategic implications from the summit, please read this).

Saudi Arabia's King Salman and Russian president Vladimir Putin, Oct.5, 2017

The Saudi monarch's visit comes after decades of strained relations. More recently, tensions were high over the war in Syria. Russia and Iran have staunchly backed Syrian President Assad while Saudi Arabia has supported the Sunni rebels fighting to oust him. However, relations began to improve in recent years and Salman's heir, Crown Prince Mohammed bin Salman, has held several meetings with Putin.

There are also common points: the Saudi kingdom, much like Russia, has been hit by the fall in oil prices since mid-2014. Despite regional disagreements, the world's two largest oil-producers found common ground on energy policy in November, when they led a deal between OPEC and non-OPEC states to cut production in a bid to shore up crude prices. So far that deal is holding and prices have recovered slightly to above $50 a barrel. In an apparent reference to the output deal, Salman told Putin on Thursday that Saudi Arabia is "eager to continue the positive cooperation between our nations in the world oil market, which fosters global economic growth."

After the meeting, as noted before, the two countries launched a joint energy investment fund worth $1 billion, which could include investments in natural gas projects and petrochemical plants. Among the deal signed, Saudi state oil firm Aramco, the world’s biggest energycompany,  signed a deal with Russian Direct Investment Fund (RDIF) and gas processing and petrochemicals company Sibur on joint projects in the area of oil refining. Amin Al-Nasser, Aramco chief executive said: "This marks a new milestone in business relations and partnerships with our counterparts in Russia. The visit by The Custodian of The Two Holy Mosques King Salman bin Abdulaziz Al-Saud to Russia will further enhance ties and will foster collaboration among Saudi and Russian companies on various fronts."

Aramco also signed a memorandum of cooperation with Russian state-owned oil company Gazprom Neft, to collaborate on drilling technologies and research and development areas, as well as employee exchange programs. According to the FT, Alexander Dyukov, chief executive of Gazprom Neft, said:

Given the ongoing macroeconomic uncertainties, it is of paramount importance that major oil producers coordinate their activities to improve the stability of the global oil and gas market. An important component of such engagement concerns sharing cutting-edge technological solutions and working together to improve efficiency in oil production and refining.

Putting the deals in context, trade volume between the two countries reached $2.8 billion last year, according to official Saudi press. Saudi Arabia's Public Investment Fund, the kingdom's sovereign wealth fund, announced in 2015 plans to invest $10 billion in Russia over the next five years, though only a fraction of that has so far been put up.

In an unexpected twist, the two countries also agreed to cooperate in nuclear energy, agriculture, information technology; trade, investments and social development.

"We have a vast potential for developing cooperation in nuclear power. Saudi Arabia plans to launch a major nuclear power program," said Russian Energy Minister and Co-Chairman of the Russian-Saudi Intergovernmental Commission Aleksandr Novak.

"Nuclear power may become one of the basic sources and an extra catalyst for the development of various industries and innovation technologies in Saudi Arabia," he added. That Saudi Arabia , the world's largest oil exporter, is planning on using Russian help to build NPPs will certainly raise a few eyebrows. 

In addition to importing Russian nuclear technology, the Saudis also appear ready to expand food imports from Russia, which is set to remain the world's biggest wheat exporter this year. Food security is a major concern for Saudi Arabia, which stopped local production of livestock feed and wheat due to water scarcity.

Novak said that for the first time a substantial delegation from Saudi Arabia, including about 200 representatives and 85 CEOs of large companies has come to Russia. "Eighty-five heads of the largest companies flew to Russia to establish links with Russian businesses and expand ties in all areas," the minister said.

Just as notably, Novak said that relations between the two countries have reached a “fundamentally new level recently,” Novak said. “Parliamentary contacts show good dynamics and the two countries business circles maintain intensive dialogue," he said, adding that that significant progress has been made. Novak added that work is underway on a roadmap for the mid-term development of trade, economic, scientific and technical cooperation between Moscow and Riyadh.

Putin and Salman are also expected to focus on extending the OPEC oil output cut agreement which has helped prop up oil prices. On Wednesday, Putin said he believes the oil cut agreement between OPEC and non-OPEC countries could be extended beyond March 2018. The next OPEC meeting is due to take place in Vienna at the end of November.

Relations between the two countries had traditionally been strained, especially during the Cold War when Saudis helped arm Afghan rebels fighting against the Soviet invasion. In recent years, however, strong relations between Saudi Arabia and the US have frayed, forcing Saudi Arabia to look for regional alliances elsewhere. Earlier on Thursday, Russian Foreign Minister Sergey Lavrov said Russia thinks highly of Saudi Arabia's role in arranging talks between the Syrian government and the oppositions in Geneva.

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In a dramatic announcement as part of today's meeting, Saudi Arabia also announcedf it has agreed to buy Russian S-400 surface-to-air missile systems, according to Saudi-owned al-Arabiya television reported on Thursday. The countries also signed a memorandum of understanding to help the kingdom in its efforts to develop its own military industries, a statement from state-owned Saudi Arabian Military Industries said.

According to Reuters, SAMI said the MoU with Russian state-owned arms exporter Rosoboronexport came in the context of contracts signed to procure the S-400, the Kornet-EM system, the TOS-1A, the AGS-30 and the Kalashnikov AK-103.

While SAMI did not specify the number of each system or the value of the procurement deal, it said the procurement was “based on the assurance of the Russian party to transfer the technology and localize the manufacturing and sustainment of these armament systems in the Kingdom”, but provided no timeframe.

This means that after Iran and Turkey, the Russian war machine has expanded to Riyadh, which as a reminder bought hundreds of billions in weapons from the US this spring.

Is Israel next in line to buy Russian weapons?

* * *

While Salman's visit signals closer Russian ties with Sunni Arab Gulf states, Russia's support for its close regional ally, Iran is not expected to change. The U.S., meanwhile, remains Saudi Arabia's top weapons supplier and its most critical Western ally.

Some, such as Anna Borshchevskaya, a fellow at The Washington Institute for Near East Policy, says Russia has no capacity to replace the United States as Saudi Arabia's key ally.

Others are not so sure. Cited by ABC, analysts said Salman's trip to Moscow is the clearest sign yet that Russia's strategy in the Middle East, including its high-risk show of military power in Syria, has paid off.

"A number of Gulf leaders have been going with greater regularity to Moscow and I think for a simple reason: Russia has made itself much more of a factor in key parts of the Middle East as the U.S. has taken a step back in some ways, particularly in Syria," said Brian Katulis, a senior fellow at the Center for American Progress.

Or, as Bloomberg put it, "the Israelis and Turks, the Egyptians and Jordanians -- they’re all beating a path to the Kremlin in the hope that Vladimir Putin, the new master of the Middle East, can secure their interests and fix their problems. The latest in line is Saudi King Salman."


Manthong 07564111 Thu, 10/05/2017 - 11:55 Permalink

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  It could get to be a bit dicey being a fighter pilot in that neighborhood. Saudi Arabia agrees to buy Russian S-400 air defense system ... Russia and Saudi Arabia Agree $3.5 Bln Arms Deal  Turkey inks deal to purchase Russian S-400 air defence systems ... Hmm.. So Russia is selling S-400’s to the Saudis… But Who The F are they going to shoot them at? If not their “secret” BFF Israel, then who?

In reply to by 07564111

francis scott … MisterMousePotato Thu, 10/05/2017 - 19:07 Permalink

At the moment, there are unconfirmed reports about the Kremlin giving awaytheir S-400 to any country who can pay. THERE'S MANY A SLIP 'TWIXT THE CUP AND THE LIP. No one here knows how many Russian units have their orders in beforeSaudi Arabia and Israel.  I believe Avigdor Lieberman asked Putin for them. THE RUSSIAN ARMY HAS FIRST DIBS.The best part of this whole episode is the way the whole world accepts theremarkable ability of these Russian anti-missile weapons, while the US'sRail and Laser Guns, get a thunderous (((YAWN))). 

In reply to by MisterMousePotato

giovanni_f Manthong Thu, 10/05/2017 - 12:52 Permalink

These S-400 are meant as a deterrent to the Angloimperialists. SA remembers Kissingers threat to invade SA in 1974 had the goat fuckers refused to play their part in the Petrodollar system. They know that at some point the Angloimperialists will turn against them. It is a question of time. A S-400 might come in handy when the Yanks eventually start develpping funny ideas about bombing Riyadh. You will know about it when George Soros unleashes his bloodhounds to write about the atrocities in Yemen - and that America has to protect this poor country against the invader from the North.It is getting interesting.

In reply to by Manthong

giovanni_f DutchZeroPrinter Thu, 10/05/2017 - 14:07 Permalink it is a signal by the Russians to SA that SA should not fear a axis Russia-Iran. What a difference between the planned, well thought-out diplomacy of the Russians aimed at balancing conflicting interests and the chaotic, twittering, incalculable, hyperbolic modus operandi of our Covfefe-in Chief in concert with his paranoid consultants. We are fucked beyond any repair. 

In reply to by DutchZeroPrinter

07564111 BarkingCat Thu, 10/05/2017 - 11:52 Permalink

It's all about the man,, he selected to greet the Saudi King is Dmitry Rogozin, a potential candidate to follow Putin.…

more humor ;)

On May 10, 2014, Rogozin started a diplomatic conflict between Romania and Russia after Romania barred his plane from entering its airspace. In response, he made two threatening posts on his Twitter account, one of which stated that next time, he would fly on board a Tu-160 bomber.

A very good diplomat but not prone to turning the other cheek, he will though, make another great President for Russia..

In reply to by BarkingCat

BarkingCat 07564111 Thu, 10/05/2017 - 12:06 Permalink

Okay I read up on him in in Wikipedia. I know it's not the best source as its usually edited by alternately motivated people but even so I hope he does not follow Putin. I do not think he would be very good for Russia. Putin is a master that the political game and has managed to advance things without putting the world on the collision course with war. This guy seems like a loose cannon that would.I would much rather see relationship normalized with other Slavic countries and Russia. There is absolutely no reason why Russia and Ukraine or Russia and Poland should be enemies. As far as I know Bulgarians have a rather positive predisposition towards Russians and this guy has managed to actually create a crisis between the two.I would say he is a lousy diplimat.....but I am basing this on Wikipedia, so my opinion could be very inaccurate. 

In reply to by 07564111

07564111 BarkingCat Thu, 10/05/2017 - 12:23 Permalink

There is now little to none chance of Russia normalizing relations with Poland or the Baltics. Daily their 'news' is nothing less than hate, and this you can read for yourself.

We must disagree on the worth of DPM Dmitry Rogozin, I personally see him as just as what will be needed in the future, he will not hesitate to take any necessary steps as outlined in our Military Doctrine, and Russians, no matter where they be, will be cared for.

In reply to by BarkingCat

BarkingCat 07564111 Thu, 10/05/2017 - 13:03 Permalink

I understand that is the case right now but situations change.The Balts are not Slavs so they lack that connection but all Slavic nations should be on friendly terms.Right now all former Warsaw Pact countries are bombarded by anti Russian propaganda. I know it is natural for Russia to take a hostile position in return. I think that is the wrong approach. Best one would be to take a neutral stance while cultivating friendly relationship with individuals in those countries that are predisposed to it. Trust me. Lots of people are so in all those countries.  You can even read it in YouTube comments attached to various videos that have Slavic topics.

In reply to by 07564111

giovanni_f 07564111 Thu, 10/05/2017 - 13:15 Permalink

Poland is still on the same mindset as 1939. Replace "Germany" with "Russia" and you have it. The Russians know it.
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      "Poland wants war with Germany and Germany         will not be able to avoid it even if she wants to."       -Polands President Edward Rydz-Smigly, Daily Mail       August 6th, 1939.  

In reply to by 07564111

Jim in MN Manthong Thu, 10/05/2017 - 11:41 Permalink

I bet the Saudis stop the bombing within a year.They'll be too exposed once all other wars on Earth are over, barring Afghanistan.Poor Israel!  No one to do their dirty work.Pax Sinoica--the Chinese Peace--is at hand, my dear friends.We just have to root out the corrupt, treasonous Clinton/McCain neolibcon Deep State criminals here at home.

In reply to by Manthong

CRM114 Thu, 10/05/2017 - 11:29 Permalink

The US won't sell the Saudis the F-22 or F-35, so they don't need the US any longer.The US has 10 years tops before the petrodollar collapses.

BarkingCat HenryHall Thu, 10/05/2017 - 12:10 Permalink

I'm pretty certain that Russia will bring you the contracts. They seem to play a very smart long-term game and is a great strategy. You do not want to have a single customer or even a single route for your product as it gives the other entity too much leverage.You can tell that Putin is making decisions not based on emotion but based on the reason.

In reply to by HenryHall