Saudi Arabia, the Arab world’s largest economy and Opec’s largest oil producer, is moving ahead full throttle.
King Salman’s landmark visit to Russia, another oil superpower, is as much about opening the country up to foreign investment and pursuing a wide-scale reform agenda that aims to diversify its economy as it is about a political rapprochement between the two countries.
Ties between Riyadh and Moscow were cooler during the Cold War and strained by Moscow’s backing of Syria's president Bashar Al Assad over the past six years.
Today, the two countries, which account for about a quarter of the world’s oil, are set to draw up a number of multibillion-dollar agreements and memorandums of understanding that will leverage synergies between their industries and largest companies.
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The nations have drawn closer after forging an agreement on oil production that trims output by 1.8 million barrels a day until March of next year. That has brought a measure of stability to markets that have seen a three-year slump in oil prices.
Collaboration between the two energy juggernauts is likely to shift the landscape of the gas market, creating new strategic opportunities that extend to shipping.
Russia, which sits on the world’s second-largest gas reserves can help the kingdom meet its growing demand for electricity and Riyadh, which is set to take Aramco public next year in what is slated to be the largest listing of its kind, is a welcome investor in Moscow.
The two countries plan to set up a US$1 billion energy fund during King Salman’s three-day visit that will invest in various oil, gas, power and renewable energy projects. Other agreements are said to include a $1bn fund targeting technology.
The accord reached by Opec and Moscow in which Saudi Arabia was instrumental was just the tip of the iceberg. The agreements Riyadh and Moscow will strike over the next three days are likely to speed the thaw in relations as mutual economic interests take precedent over other considerations and herald a new era.
