Saudi and Russia to extend co-operation beyond energy to defence and Syria peace

Historic visit to Moscow by King Salman shows how both countries are increasingly finding common ground

Saudi's King Salman and Russian president meet at the Kremlin in Moscow. Alexei Nikolsky / EPA

A general view of Russian-Saudi talks. King Salman is on a three-day visit to Russia. Alexei Nikolsky / EPA

Saudi Arabia and Russia yesterday agreed to expand their cooperation beyond energy and work together to end the conflict in Syria. Pavel Golovkin / AP Photo

Riyadh and Moscow also agreed to galvanise defence manufacturing in Saudi to create local jobs and boost diversification efforts. Sergei Chirikov / EPA

The dramatic improvement in relations between Russia and Saudi Arabia comes even though both countries support different sides in the six-year war in Syria. Yuri Kadobnov / AFP Photo

Russian state media hailed King Salman’s visit as evidence that Russia’s backing for Mr Al Assad had made Mr Putin “master of the Middle East.” Yuri Kadobnov / AFP Photo

Saudi Arabia and Russia yesterday agreed to expand their cooperation beyond energy and work together to end the conflict in Syria and galvanise defence manufacturing in the kingdom to create local jobs and boost diversification efforts, following a historic meeting at the Kremlin between King Salman and Vladimir Putin.

While the two countries have been at odds on Syria, where Moscow supports President Bashar al-Assad and Riyadh backs the opposition, the visit and a number of economic agreements announced yesterday, including for Saudi to acquire several defence systems from Russia, emphasise how they have increasingly found common ground in recent months after they led a global oil production restraint deal to shore up crude prices at the end of last year.

Saudi Energy Minister Khalid Al-Falih said in Moscow yesterday that cooperation between Russia and Saudi Arabia “breathed life back into Opec” and made his country more optimistic about the outlook for oil than it has been for several years. The “success of this collaboration is clear,” he said.

It is also hoped that collaboration on defence manufacturing “will act as a catalyst for localising 50 per cent of the Kingdom’s military spending as targeted by Vision 2030”, according to a statement from Saudi Arabian Military Industries, known as Sami. Saudi Arabia is the world’s fifth biggest spender on defence with a budget of US$48.7 billion last year, according to IHS Markit.

Kalashnikov rifles, anti-aircraft and anti-tank missile systems, and rocket and grenade launchers will be manufactured in Saudi Arabia, creating hundreds of jobs for its nationals and supporting the diversification of its economy away from its dependence on oil.

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Saudi’s economy is expected to return to growth next year thanks to expansion in its oil GDP, the IMF said yesterday. The kingdom is undertaking massive economic transformation plans aimed at diversifying its oil income and creating new revenue streams to cope with the low oil price era, a strategy led by Crown Prince Mohammed bin Salman. This year non-oil GDP is forecast to grow 1.7 per cent this year, according to the IMF.

Yesterday, Mark Mobius, one of the world’s leading investors in emerging markets said that his Templeton Emerging Markets Group could potentially more than double its investment allocation in Saudi Arabia’s stock market to up to $1.16bn given the potential of its non-oil economy.

“There’s no question about it. With the new liberalised regime, there’s a tremendous hope that things will move a lot faster than they have up to now.”