Magnifying Russia’s Military Power in Middle East is Putin’s Oil and Gas Deals

Russia is now using its other strong suit, energy, to expand its influence across the region after reinventing itself as a major power in the Middle East by force in Syria.

Looking beyond Syria where they have backed opposing sides in a brutal proxy war, a series of agreements is allowing Russia and the Gulf states to cooperate in areas where their interests meet. Over the past month alone, Russia secured a $5 billion investment by Qatar in oil giant  Rosneft PJSC, and then saw Rosneft agree to pay as much as $2.8 billion for a stake in an Egyptian gas field and brokered the first deal between the Organization of Petroleum Exporting Countries and non-OPEC nations in 15 years to cut oil production.

“Russia is really keen to increase leverage in the Middle East by every means,” said Fyodor Lukyanov, chairman of Russia’s Council on Foreign and Defense Policy.

Putin is pushing at an increasingly open door as a recognition that Russia can no longer be ignored on regional security issues helped by a cooling of U.S. alliances in the Gulf in recent years and the havoc cheaper oil has wreaked in energy-dependent economies.

As they revive political, arms trading and energy relationships that withered following the fall of the Soviet Union, Russian companies and diplomats are making most inroads in the Soviet-era markets of North Africa and Iran. Russia has also rebuilt a strong relationship with Egypt through President Abdel Fattah al-Sisi.

Lukyanov said that since U.S. security and economic ties are so deeply entrenched, ambitions in the Gulf remain limited. He said that the primary Russian motivations for cutting deals to stabilize the oil price and secure investment in Rosneft were financial while geopolitics played a significant role.

As an area of non-confrontation that both sides used to open up channels at the highest levels to secure a common goal, namely to bolster oil prices, diplomats involved in the agreement between Russia and OPEC saw the extensive oil diplomacy. While the breakthrough came from a late night phone call between the Russian and Saudi oil ministers, the deal involved direct talks between Putin and his Saudi and Iranian counterparts.

“What is occurring now is about the bigger picture,” said Theodore Karasik, senior adviser at Gulf State Analytics. He sat on Dubai’s Russian Business Council until this year. “It’s not just about Syria, but all of the Levant and, because of Egypt and Libya, North Africa too.”

He said that with U.S. President-elect Donald Trump’s more transactional approach to foreign policy, the changes are likely to accelerate.

Having fought numerous wars with Persia and the Ottoman Empire over centuries, Bottom of Form

Russia has a long history in the Middle East. Backing Egypt under President Gamal Abdel Nasser and post-colonial Algeria, as well as Syria, Iraq, Libya and what was then South Yemen, it entered the Arab world during the Cold War.

The U.S. secured Israel and the Arab monarchies. The Soviet hold in the region was always unsteady and largely collapsed with the end of communism. The arms trade, is providing inroads for Russia to pick up where the Soviets left off while Russia’s entry to the LNG industry is relatively new. According to figures from SIPRI, the arms trade watchdog, compared with $6 billion in the previous decade, between 2006 and 2015, Russia sold $12.7 billion worth of arms to the Middle East and North Africa.

(Adapted from Bloomberg)

Categories: Economy & Finance, Uncategorized

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