Complex and often contradictory interactions among Saudi Arabia, Russia, and Iran are shaping regional dynamics in the Middle East and beyond. The Nov. 24 interim deal on Iran’s nuclear program, that was hammered out in Geneva, is still sending shockwaves across the region. Though there will be obstacles along the way, if Washington and Tehran overcome all of them to reach a comprehensive agreement, it could have far-reaching geo-strategic ramifications for Russia and Saudi Arabia.
There are many interests linking Iran and Russia and it seems to many that there is an alliance between the two countries, particularly when analyzing the position of both sides regarding the situation in Syria. On the contrary, there are also strong indications that the two countries’ interests are destined to clash. Indeed if Tehran gets out of its international isolation, it may pose a threat to many of Moscow’s strategic interests in the medium and long term.
Energy: Iran’s looming threat
Iran has recently threatened to trigger a price war in the global oil markets, Oil Minister Bijan Namdar Zanganeh early this month, at the start of OPEC’s 164th meeting, declared intent to reclaim Iran’s share of the oil market even if it means a collapse in oil prices. “I will not give up on Iran’s right to produce 4 million barrel per day (mb / d) under any circumstances... even if the oil price reaches $20 a barrel.” In the short term, the impact on Iranian crude oil supply to the international market is limited as it will take time for Tehran to restore oil production to pre-sanctions levels. Ed Morse, global head of commodities research at Citi, argues OPEC will be forced to confront increasing production from within its ranks next year as growing U.S. output erodes demand for OPEC crude. However, Abdallah el-Badri, OPEC’s secretary-general told the Financial Times: “I see 2014 as a normal year, [but] maybe 2015/2016 will be difficult.”
In the end, Russia and Saudi Arabia don’t need to be the best of friends to cooperate effectively on a range of issues that are vital to national securityDr. Naser al-Tamimi
Nevertheless, Saudi Arabia will be the least impacted by any fall in oil prices. An International Monetary Fund analysis indicates that fiscal breakeven prices in 2014 for major OPEC oil exporters range from about $52 to $153 per barrel: Iran ($153), Algeria, ($113), Libya ($112), Iraq ($102), Oman ($97), Saudi Arabia ($84), UAE ($71), Qatar ($59), and Kuwait ($52). For Russia, whose economy is two-thirds reliant on energy export revenues, any price war will be a disaster and may lead to serious consequences for Moscow. Indeed, the specter haunting the Kremlin is of oil prices falling to $60/barrel. In that case, according to Economic Intelligence Unit (EIU) the budget will be plunged into deficit and the economy into recession. In this context, Russia will be watching the actions of Saudi Arabia very closely.
Another area which worries Moscow is the near borders. During the last decade, Russia viewed Iran as a potential partner in balancing U.S. and Turkish influence in Central Asia and the Caucasus. A recent report by Washington - based Center for Strategic and International Studies (CSIS) stated that Russia and Iran have tacitly agreed to avoid confrontations in the Caucasus and to support mutual goals with respect to Caspian energy routes. Nevertheless, this alignment is likely to have limited durability in light of enduring mutual suspicions and largely competing commercial and political interests. Jeremy Shapiro, former U.S. State Department official and currently a visiting fellow with the Foreign Policy program at the Brookings Institution believes that “the presence of Iran on the global market as both gas exporter and a transit county would in the coming years destroy any hope Russia has of maintaining its gas stranglehold on Europe or on establishing one on South or East Asia. “
Indeed Tehran has the potential, in medium and long term to seriously compete with Moscow on the energy front and loosen Russia’s energy grip over Ankara. According to Stratfor analysis, Turkey is largely dependent on Moscow’s natural gas as it provides 60 percent of Turkey’s natural gas imports, compared to 18 percent of natural gas imports from Iran. Ankara could decrease the Russian share by importing more Iranian (and Iraqi) gas. Russia and Iran’s energy interests in Central Asia and the Caucasus are similarly at odds. Central Asian states such as Kazakhstan and Uzbekistan are looking to Iran as an alternative to Russia. Tehran could become a transit corridor for them to the Gulf or Turkey. In the Caucasus, Iran could challenge Russia’s economic and political influence in Armenia by increasing natural gas exports to the country. In Azerbaijan or Georgia, Iran could challenge Russian strategic interests, by offering both countries an alternative land route for transporting energy to Turkey and Europe or the Gulf.
Economic Relations: Limited partnership
Beyond arm sales and nuclear cooperation, economic relations have also proved to be difficult to grow in a big way, the total annual bilateral trade between Iran and Russia is estimated to have increased significantly over the past decade, but volume remains quite small, about $2.4 billion in 2012. Russia accounts for about 1.2 percent of Iranian foreign trade volume, and Iran represents only 0.2 percent of Russia’s, according to the IMF. The two governments have expressed a desire to expand the volume of their bilateral trade, but potential for dramatic growth seems unlikely as the economies are not complementary and the prospect of lifting international sanctions will bring strong competition from Western companies.
In contrast, it is true that the overall economic ties between Russia and Saudi Arabia are minimal (about $1.4 billion in 2012). Still Russia’s nuclear and defense firms (even other companies) have a huge potential market and could profit considerably if GCC countries, Saudi Arabia in particular, opened up their markets to Russia. Indeed, if Russian companies succeed in penetrating the GCC market, that will be a very important breakthrough for Moscow.
On top of this, Iran and Russia’s geopolitical interests are increasingly divergent. Iran want guarantees from the Americans that Iraq will not develop an anti-Iranian government and that Washington will work to prevent this. George Friedman the founder and CEO of STRATFOR put it bluntly: “Tehran needs to be certain that Iraq is friendly to its interests and that neither Russia nor Turkey can threaten it in the long run. For their part, the Americans want a stronger Iran to contain Saudi support for Sunni insurgents, compel Turkey to shape its policy more narrowly, and remind Russia that the Caucasus, and particularly Azerbaijan, have no threat from the south and can concentrate on the north.” In this sense, both Moscow and Riyadh need to cement their position in the new game.
Yet Moscow still has leverage to counterbalance any Iranian maneuvers which may threaten Russian interests. This could include slowing down nuclear cooperation with Iran and declining to provide Tehran with the most advanced Russian weapons systems. Alexander Shumilin the director of the Center for the Analysis of Middle East Conflicts with the Institute for U.S. and Canadian Studies at the Russian Academy of Sciences argues that if Russia were to deliver its S-300 surface-to-air missiles to Tehran, it could further exacerbate its already bad relations with GCC countries. Moscow also does not want Iran to have nuclear weapons. Russian Defense Minister Sergey Lavrov stated publicly that, “once a verifiable agreement is implemented to end the Iranian nuclear problem, Moscow would renew international to rid the Middle East of weapons of mass destruction.” This position will be welcome by Saudi Arabia and other Arab countries.
Perhaps most importantly, Russia also may respond in two fronts, first by deepening its relationship with Saudi Arabia, Egypt and Iraq. In this sense, Moscow could sell advance weapons to strengthen the Iraqi army, consequently, empowering the Iraqi government to resist Iranian encroachment. Additionally three important developments are taking place in Iraq that pose a threat to Iranian influence in the long run. China is rapidly expanding its presence in Iraq’s oil industry. To protect its interests, Beijing also could help to strengthen Iraqi central government. The second issue is the declining influence of Iranian religious establishment in Iraq. Nathaniel Rabkin the managing editor of Inside Iraqi Politics noted that “the rebirth of Najaf as a world center of Shiism may deprive Iran’s present rulers of their religious pretensions, paving the way for the end to the regime’s Islamist system.” Finally, many influential Iraq’s political and business elites are influenced by the Gulf economic development (particularly the Dubai model) not Iran. If all these developments coincided with growing nationalism among Iraqis, Tehran will certainly look at these developments as very dangerous.
Within this strategic backdrop we can look at Riyadh-Moscow relations. In the end, Russia and Saudi Arabia don’t need to be the best of friends to cooperate effectively on a range of issues that are vital to national security. That means they need to recognize that they can cooperate on issues in which they can find mutual benefit while they can simultaneously compete over issues on which they don’t agree. Although Saudi-Russia relations are still clouded by the Syrian conflict, what it is certain that these relations are on the verge of positive developments.
Dr Naser al-Tamimi is a UK-based Middle East analyst, and author of the forthcoming book “China-Saudi Arabia Relations, 1990-2012: Marriage of Convenience or Strategic Alliance?” He is an Al Arabiya regular contributor, with a particular interest in energy politics, the political economy of the Gulf, and Middle East-Asia relations. The writer can be reached at: Twitter: @nasertamimi and email: email@example.comSHOW MORE