As expected, President Putin has cruised to a fourth term in the March 18 elections.
Once again a leader with far reaching ambitions and penchance for strong man rule has joined China’s President Xi and Germany’s Angela Merkel to continue providing political certainty for these global economic and political powers, with President Trump looking on enviously as he wishes for a life time US style presidency to cement his own brand of vision.
Vladimir Putin relied on a deep well of support based on two main factors: the huge rise in living standards over his 18 years in ofﬁce and Russia’s triumphant return to the world stage tinged with a resurgent nationalism and a feeling that the world is ganging up on Russia.
When he came to power, he warned “for the ﬁrst time in the last 200–300 years, Russia is facing the real danger of winding up among the second or even third-tier of nations in the world.”
His actions since then have been to reverse this decline by rebuilding Russia’s military power and using a new found partnership with OPEC, and particularly with Saudi Arabia, to re-energize global oil prices and creating a mutually beneficial energy nexus with the Gulf oil producers.
As such it behoves the Gulf to try to manage the opportunities as well as the risks for closer Russian relations without upsetting other established geo political alliances.
Russia is now very much in the top league, but how long will that last? Already, its economic progress has slowed relative to other nations, and the prospects of more tit-for-tat retaliations and sanctions by Western powers enraged at what they see Russian attempts, real or otherwise, to carry out assassination and destabilization actions in other countries might bring about a new Cold War.
For Gulf oil producers, the pact with Russia to curb production to prop up oil prices has established a mutually beneficial economic relationshipDr. Mohamed Ramady
As he prepares for his next six-year term — which could be his last, given constitutional restrictions and his age of 65, unlike China’s President for Life Xi — Putin faces interlocking threats to his economic promises and his geopolitical ambitions.
Analysts agree that in the short term he will continue to make gains but long term costs, if unresolved, could mount and can Russia afford this new stand-off with the West?
The energy equation seems to be one of the few bright spots for Mr Putin as oil prices surged in the years after Putin came to office in 2000, powering an economic boom that transformed Russia. But the oil resource curse and dependency on this natural resource, although to a much lower degree than the Gulf countries, has also resulted in erratic economic growth.
Russia was hit in 2014 by the one-two punch of falling oil prices and Western sanctions imposed over its annexation of the Crimea peninsula from Ukraine. Adding to the pain of cheaper oil, the Russian rouble fell sharply, but the economic weakness has helped the central bank bring inflation to record lows and Russia recently saw its credit rating upgraded out of the junk category, thanks to Putin’s tight budget policies.
Putin’s economic woes may not hamper his global reach in trying to re-establish Russia’s old glories and he has been a master tactician, knowing when to play his cards.
He’s shown he can pull off major geopolitical surprises such as the alleged meddling in the 2016 US presidential election or the 2015 military operation in Syria, both done without great expense but at the same time ensuring that Russia has new found allies in doing so like Turkey in Syria and with the EU signatories to the Iranian nuclear deal.
Putin now faces a Western world on guard for his next moves led by the UK’s Prime Minister Theresa May who seems to have been politically energised by taking a tough anti-Russian line following the attempted assassination of former Russian double agents or the bizarre deaths of Russian business exiles.
For the Gulf oil producers, the pact with Russia to curb production to prop up oil prices has established a mutually beneficial economic relationship when both sides needed it as falling oil prices to under $ 30 per barrel in 205 put fiscal strain on oil economies, with large depleting rates of their foreign exchange reserves and introduced austerity measures.
Diversification of resource based economies became more problematic, but the 2016 OPEC and non-OPEC agreement gave these economies a boost . There is now a new sense of optimism that the additional oil revenues can be channelled to domestic job generating ventures as well as higher yielding international investments. The additional revenues also allow the Gulf countries to play a more assertive foreign policy role to protect their national interests abroad.
The current OPEC plus agreement is due to expire at the end of 2018 and there is now much speculation on whether Russia, following Putin’s re-election, will be tempted to continue with the pact in 2019 or agree to a new form of mechanism to avoid oil prices collapsing.
This implies that Gulf-Russian cooperation, at least in the vital energy sector, will still continue in one form or another. Maybe there are more surprises in store if and when President Putin takes up on the invitation to make an official visit to Saudi Arabia given the new personal bond established between him and Crown Prince Mohammed bin Salman which made the current OPEC plus pact possible over objections from the Russian part privatized national oil companies.
Dr. Mohamed Ramady is an energy economist and geo-political expert on the GCC, former Professor at King Fahd University of Petroleum and Minerals, Dhahran, Saudi Arabia, and co-author of ‘OPEC in a Post-Shale World – where to next?’. His latest book is on ‘Saudi Aramco 2030: Post IPO challenges’.