Getting warmer.

Photographer: Sergei Karpukhin/AFP/Getty Images

The Saudis Are Cozying Up to Putin

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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The U.S. narrative about Russia is that it's a waning power run by an overly ambitious dictator that is doomed to isolation and diminishing global influence. That's not how an important U.S. ally sees it, however, judging from the $10 billion deal a Saudi Arabian state investment fund has signed with the Russian direct investment agency.

The Public Investment Fund, which has big holdings in Saudi Arabia's biggest non-oil companies (including 47 percent of the chemicals and steel conglomerate Saudi Basic Industries), is setting up a partnership with the Russian Direct Investment Fund. The state entity has $10 billion in capital that it can invest in Russia alongside foreign partners. As part of the deal, the Saudis have agreed to invest $10 billion in Russian agriculture, health care, retail, transport and real estate. According to Kirill Dmitriev, the chief executive of the Russian Direct Investment Fund, seven projects have already been approved.

QuickTake Saudi Arabia

The deal follows a visit to the St. Petersburg Economic Forum by the son of King Salman, Mohammed bin Salman, who is defense minister and deputy crown prince. The prince invited President Vladimir Putin to visit Saudi Arabia and conveyed to the king an invitation from Putin to visit Russia. 

Russia and Saudi Arabia have rarely seen eye to eye. The Saudis are Russia's major competitors in the oil business: Russia is now fighting for market share in China. In the Middle Eastern wars, the two countries are aligned with the opposing sides. Saudi Arabia has worked hard to destroy Bashar al-Assad's regime in Syria, a Putin ally. The Saudis are enemies of Iran, and Russia has just agreed to revive a deal to supply S-300 missiles to the Tehran regime that had been scuppered by international sanctions. Saudi Arabia is the second biggest buyer of weapons in the world -- largely from the U.S. -- but it has never bought from Russia, the second-biggest seller. 

One reason for the warming of ties is that Saudi Arabia wants Russian help in building 16 nuclear power plants, and the prince signed a tentative agreement in St. Petersburg. The Saudis probably were reluctant to approach the the U.S., which is trying to prevent a nuclear race in the Middle East. The Moscow visit was an opportunity for Prince Mohammed to position himself as more flexible and open than other, traditionally pro-U.S. members of the Saudi royal family, such as Foreign Minister Adel Al-Jubeir and crown price Mohammed bin Nayef, according to Bruce Riedel of the Brookings Institution. "The royal family is disillusioned with President Obama and his policies in the region," he wrote. "Becoming the advocate of diversifying Saudi interests beyond the United States is a popular move for Prince Mohammed to make."

A veiled warning to the U.S. was clearly among the goals of Price Mohammed's Russian trip. Abdurahman Al-Rashed, general manager of Saudi-owned Al-Arabiya television station, wrote in Asharq Al-Awsat, a newspaper with close ties to the Saudi establishment:

In my opinion, the most important feature of the Deputy Crown Prince’s visit was that it was not customary; it took place at a time when the United States and its European allies have decided to economically boycott Russia, sanctioning Moscow over events in Ukraine. This time, the Saudi government took an unusual step and decided to do the opposite: rekindle its relations with Moscow, grow business ties, and sign agreements and deals in vital fields such as gas and nuclear and military technologies. This is one of the rare times that Riyadh has taken an opposing line to Washington. But the reason is clear: the Saudis who supported the Western position to boycott Iran for 20 years have discovered that Washington betrayed them when it decided to collaborate with Tehran, without coming to an understanding with its partners who had joined the initial boycott.

This feeling of betrayal apparently has led the Saudis to seek some balance, a second partner with an interest in containing Iran, and perhaps prevent a Russia-Iran alliance. Iran's defense minister, Hossein Dehghan, visited Moscow in April, and his discussions with his counterpart Sergei Shoigu apparently touched on broader military cooperation than just the S-300 missiles.

Putin probably is flattered by the attention he's getting from the major Middle Eastern players. Russia hasn't been in such high demand in the region since the era of proxy wars between the U.S. and the Soviet Union. Now, both Iran and Saudi Arabia are looking for a second center of gravity to counterbalance the U.S.  

As for Putin, he is willing to work with anyone to show the U.S. that the world is no longer unipolar and that Russia is a force to be reckoned with. His alliances are purely situational, and that's an advantage his regime has over the Soviet Union, which was constrained by ideology.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor on this story:
Max Berley at mberley@bloomberg.net