King Salman’s visit will herald new era of Saudi-Russian economic cooperation

RIYADH: The Kingdom is set to start a new chapter in its overall relations with Russia, and herald a new era of Saudi-Russian economic cooperation following the high-profile visit of King Salman, which begins on Thursday.
Russia, no doubt, will be a new addition to the list of Saudi Arabia’s most-favored nations, with which it will enter into a strong strategic economic alliance within the days to come.
Saudi-Russian relations, which took off during the visit of Crown Prince Mohammed bin Salman to Russia in May within the framework of Vision 2030, will be further consolidated during the visit of King Salman.
Several agreements including memoranda of understanding (MoU), predominantly in the fields of energy, economy and commerce, have been lined up for signing between the two countries during the royal trip.
No doubt, Saudi Arabia is intensifying its diplomatic efforts to start a new era on the commercial front. During the visit to Russia of Crown Prince Mohammed bin Salman, the Saudi side expressed a desire to develop strong cooperation with Russia in investment, space exploration, residential construction and other areas.
Back in June, on the sidelines of the St. Petersburg International Economic Forum, an agreement was signed on long-term bilateral cooperation in the peaceful use of nuclear energy. The two countries also identified that the most promising areas of cooperation are energy, geological exploration, mining, petrochemicals, tanker construction, investment cooperation, and training of personnel.
This is apart from the interest evinced by the Russian Direct Investment Fund (RDIF) and the Saudi agencies to cooperate.
On the trade front, the two countries have forged closer ties. Total trade exceeds $1 billion, but these are the figures of the past. In fact, the commercial landscape between Riyadh and Russia will rapidly and substantially change following the visit of King Salman.
Referring to the agreements to be signed by Riyadh and Moscow during King Salman’s visit to Russia, a Reuters report said that Saudi Arabia is expected to sign several memoranda with Russian companies during the royal visit. State oil giant Saudi Aramco and Saudi Basic Industries Corp. (SABIC) will sign a memorandum with Russia’s biggest petrochemical company Sibur to look for opportunities to build petrochemical plants in both countries.
The agreement is one of several due to be signed during King Salman’s visit to Russia this week, his first trip to Moscow since becoming king in 2015. Other agreements expected to be signed include a memorandum between Saudi Aramco and Novatek, Russia’s biggest non-state gas producer, to look for investment opportunities in the gas sector, said the Reuters report. Local Saudi Aramco and SABIC officials declined to comment on the possible deals.
Regarding other agreements to be signed by the two sides, Kirill Dmitriev, the head of the sovereign RDIF, on Tuesday said that “the fund was in the final stage of negotiations with Saudi partners about major Russian projects in the Kingdom,” without giving specifics. He said, however, that the fund and its Saudi partners would announce the creation of a new investment platform in energy sectors, as well as investments in industry and infrastructure.
Moreover, the Russian side has also expressed interest in Saudi Arabia’s renewable energy sector, where the Kingdom was looking for major investments to help it produce 10 percent of its power from renewable sources. Also, Saudi Arabia is looking at nuclear energy to meet rising domestic power demand so more of its crude oil can be exported or converted into petrochemicals, rather than being used to generate electricity.
Dmitriev said that significant results have been achieved in the area of investment cooperation under a joint $10 billion framework created by the RDIF and Saudi Arabia’s Public Investment Fund (PIF). Dmitriev told Reuters in June after the RDIF agreed to buy a stake in Russian oil services company Eurasia Drilling, that the fund would also welcome Saudi investment in the company.
He said Saudi investors were already involved in a number of highly profitable projects in Russia, in sectors such as petrochemicals, infrastructure, logistics and hydropower, among others. Russia and Saudi Arabia will also unveil a “large” deal in the infrastructure sector later this week with Riyadh investing in toll roads in Russia including in Moscow, Dmitriev, said on Monday.
Russia’s interest in Saudi Arabia is multidimensional. Economically, Russian-Saudi understandings on oil production and oil exports can significantly affect global markets, Russia’s economy and the Russian government’s federal budget, which still depends heavily on oil-related tax receipts despite declining energy prices.
“Moscow also sees Saudi Arabia as a potential source of investment, something of growing importance,” said Hanif A. Amin, a local banker.
Amin said that “the visit of King Salman to Russia will herald a new era of commercial cooperation, which will go a long way in changing the economic landscape of the two countries, besides political discourses on the key regional issues.” Moreover, economic conditions in Russia in turn shape Russia’s domestic political environment as well as economic conditions in the country.