Saudi King Salman kicked off his historic four-day visit to Moscow Thursday with the signing of 15 cooperation agreements valued to be worth billions of pounds. Though these deals ranged in focus from space exploration to military arms deals, oil and energy was front and center.
Saudi Arabia, OPEC’s biggest crude producer, and is attempting to acquire oil and gas assets within Russia. As a result, the two countries will be signing joint investment agreements worth more than $3 billion over the next few days.
This includes a $1.1 billion dollar agreement that allows Russian petrochemical firm Sibur to build a plant in Saudi Arabia and a joint fund that will invest $150 million in Russian private oilfield services firm Eurasia Drilling Company Limited.
Saudi Arabia and Russia recently put aside their mutually historic animosity towards each other to eliminate the global supply glut in the world’s oil. This deal successfully helped stabilize markets, although prices haven’t yet risen to their intended levels. Though this deal has already been extended through March 2018, they are discussing extending it even further.
King Salman was reported as saying “We are committed to continuing positive cooperation between our nations to achieve stability on the global oil markets.”
Although Saudi Arabia is still attempting to build closer ties with President Trump, this visit marks the beginning of an alliance that experts expect will go beyond just energy.
Russian International Affairs Council expert Yury Barmin commented, “Both countries are looking to reap political and economic benefits during the visit.” He later added, “The Russians are looking to perpetuate their image of a leading power in the Middle East, while Riyadh is hedging its bets for regional partnerships at a time when the United States is scaling down its presence in the region.”
In addition to the oil and gas investments the two countries also made agreements in nuclear energy. Rosatom, a Russian state nuclear corporation, has already sent proposals to the Saudi government for construction of a nuclear power plant in Saudi Arabia.
“We have a vast potential for developing cooperation in nuclear power. Saudia Arabia plans to launch a major nuclear power program,” Russian Energy Minister and Co-Chairman of the Russian-Saudi Intergovernmetnal Commision Aleksandr Novak commented.
“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.
However, the risks remain. Political turmoil has long separated the two countries as geopolitics have put them on opposite sides of the Syrian conflict. Additionally Mazen Al-Sudairi, head of research at Riyadh-based Al Rajhi Capital cited the volatility of the ruble as a potential issue.
None-the-less the visit is a historic one as it marks the first ever state visit to Russia by a reigning Saudi Monarch. Though the true scale of the visit remains to be seen, it’s clear that the impact will be immense both politically and within the energy industry.
Chris Weafer, a senior partner at Macro-Advisory commented “…King Salman doesn’t do courtesy calls, he doesn’t do photo opportunities; this (visit/relationship) makes a great deal of sense for Saudi Arabia. It needs to diversify its economy and its role in the global economy.”
Article written by HEI contributor Kevin Abbott.