ANDREW S. WEISS, JASMINE ALEXANDER-GREENE
The spotlight is back on the burgeoning Saudi-Russia relationship, thanks to their renewed efforts to prop up oil prices and Saudi Crown Prince Mohammad bin Salman’s role in brokering a surprise deal in September to release foreign prisoners of war seized on the battlefield in Ukraine, including several U.S. and UK military veterans. The Kremlin’s ties with Saudi Arabia and other members of the Gulf Cooperation Council (GCC) have expanded steadily following the launch of OPEC Plus’s oil production arrangement in 2016 and Saudi King Salman bin Abdulaziz Al Saud’s historic first visit to Moscow in October 2017.
Analysis of the drivers behind Russia’s relationships with the GCC states typically centers on a widespread desire across the region to hedge against the purportedly waning security ties to the United States. According to this logic, the writing on the wall says that the Middle East is becoming less of a core U.S. national security interest as a result of the U.S. pivot to Asia, the drawdown of the U.S. military presence in Iraq and Afghanistan, and surging U.S. domestic oil and gas production, among other things. The GCC states and Russia also share a strong preference for authoritarian governance. Some of these drivers may be real, but it would be an exaggeration to conclude that Russia and regional players are actually positioning themselves for the Kremlin to become a leading provider of security in the Persian Gulf, let alone supplant the United States.
This ambivalence about Russia helps explain why most of the Gulf Arab states chose not to align themselves with the U.S./EU push to isolate and punish Russia at the beginning of the war in Ukraine. Only Kuwait and Qatar immediately spoke out and condemned Russian President Vladimir Putin’s actions. The United Arab Emirates, which holds a rotating seat on the United Nations Security Council this year, abstained on a U.S.-drafted resolution submitted the day after the Russian invasion—a move that a senior UAE foreign policy aide justified by claiming that “taking sides will only lead to more violence.” Members of the GCC did vote in favor of a UN General Assembly resolution condemning the Russian invasion in early March, only to change course by abstaining on a vote to suspend Russia from the UN Human Rights Council in early April. Such zigzags are hardly unique, as many countries around the world have been reluctant to criticize Russia for the war.
However, the consequences of the GCC states’ positions on the war have had more impact than that of many other countries. When oil prices climbed toward $130 per barrel in March, Saudi and other Gulf leaders rebuffed requests from U.S. and EU leaders to ramp up oil production in order to alleviate pressure on the global economy and to help tame inflation. Instead, they criticized Western governments for having prioritized climate and energy transition goals at the expense of investment in new fossil fuel production. (Ever pragmatic, Qatar and the UAE have since responded positively to entreaties from Germany and France to support increased liquified natural gas production and shipments to Europe.)
But, on balance, the GCC states effectively sided with the Kremlin, which enabled the Putin regime to refill its coffers and to limit the impact of U.S. and EU sanctions. The October 5 decision by OPEC Plus to cut oil production by 2 million barrels per day testified to their undiminished desire for higher oil prices, a slower energy transition, and a dampening of the outlook for U.S. shale production.
The U.S. position that Russia’s war against Ukraine is actually a war of autocracy against democracy has highlighted the overlapping interests of Russia and GCC states. For their part, the GCC states have displayed little desire to comply with demands from U.S. officials that they not flirt with Russia or China. In the meantime, they are aggressively expanding cooperation with Israel for trade, IT, infrastructure development, military technologies, surveillance systems for internal security, and defense against Iranian missile and drone strikes. Nor have they lost sight of Russia’s continued equities with Iran.
SANCTIONS HEADACHES
Grumbling in Western policy circles over the GCC states’ broadening commercial and financial ties to Moscow has not disappeared. The growing focus by the U.S. and its EU partners on stricter enforcement of existing sanctions testifies to that concern, but it is hard to imagine that this issue will become a key litmus test, given the overriding importance of energy and security ties with the Gulf countries at the current moment. Russian state entities, officials, private firms, and high-net-worth individuals have long treated the UAE, which has not imposed any sanctions on Russia, as a playground for their business and personal interests. The UAE is now the second-most popular destination for Russian overseas travelers, and significant numbers of wealthy individuals and professionals relocated there after the war began.
Media reports highlight how the country has been used for keeping valuable property like private aircraft and yachts belonging to sanctioned individuals out of the hands of U.S. and EU law enforcement. In addition, Emirati financial institutions are enjoying increased inflows from Russian entities. But they have reason to be mindful of the potential cost of facilitating Russian sanctions evasion. The UAE has long been subject to heavy U.S. scrutiny over concerns about money laundering, terrorism financing, nonproliferation, and illicit Iranian activities. In a serious blow to the UAE’s ambitions to become a global financial center, the country was added to the Financial Action Task Force’s “grey list” earlier this year.
Nevertheless, quiet diplomacy has yielded some progress. The U.S. Treasury Department’s recent efforts to disrupt use of the Russian Mir National Payments System for sanctions evasion are a good case in point. While that initiative appears to be primarily aimed at Turkey, it is surely meaningful that Denizbank, one of the large Turkish banks that immediately announced that they were suspending use of Mir, is 100 percent controlled by a Dubai-based institution.
AN EVEN BIGGER TEST
The attitudes and actions of the Gulf Arab countries toward Russia are becoming ever more important as a U.S.-led effort to impose a price cap on exports of Russian oil takes shape. The potentially far-reaching initiative is intended to choke off the financial windfall that the Kremlin has enjoyed without somehow taking Russian barrels off the market in the process. (Russia’s current account surplus from January to July was $167 billion, roughly triple the level of the same period in 2021.) Yet the Kremlin and the Gulf Arab states may have plenty of incentive to sabotage the effort, according to Sergei Vakulenko, a longtime energy executive and Carnegie contributor.
In early September the Kremlin starkly warned that it will not stand by and allow the U.S. and EU to introduce a price cap. Although Russian officials have not yet tipped their hand, the Kremlin’s cutoff of most gas flows to Europe, the sabotage attacks on the Nord Stream 1 and 2 pipelines, and the sheer size of Russia’s role in global crude energy markets suggests that such a threat must be taken seriously. For example, a Russian decision to block or restrict oil sales could roil markets even though oil prices have declined significantly in recent months. The actions of the GCC states in coming weeks will be critical, and it is not at all clear whether these countries intend to align themselves with Western governments bent on punishing the Kremlin.
According to Vakulenko,
[An] emerging buyers’ cartel risks potentially manipulating the entire oil market and its prices. If the cartel succeeds in forcing Russia to obey its rules, the Arab countries may be next. If Russia counters the price cap by reducing its output, therefore, Saudi Arabia may be reluctant to increase its oil exports to compensate for the reduction, whether it has sufficient available production capacity or not.
Such a dilemma gets to the heart of why the state of Russia-GCC relations matters a great deal at the moment. Putin has amply demonstrated in recent days that he intends to escalate the crisis further. If he uses the powerful oil weapon at his disposal, he has a decent shot at damaging the economic well-being of his Western adversaries. While flows of Russian oil have been heavily redirected toward Asia since February 24, any significant reduction in Russia’s daily exports of 8 million barrels of oil and refined products could disrupt global oil markets. Of course, such a move risks alienating friendly nations like China and a great many others that have chosen to stay on the sidelines.
That dilemma highlights why commercial considerations, not national security, will continue to dominate the contours of the GCC states’ relationship with Moscow.
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