The Ukraine crisis has put further pressure on Russia to fortify its relations with the Gulf Cooperation Council countries through bolstering economic and trade ties as Moscow increasingly finds itself isolated from the West.
Russia is counting on the support of its allies and other neutral countries in the ongoing conflict it has been facing since the onset of the Ukraine war.
The GCC plays a critical role in Russia’s scheme of things, more so now when it would want to offset the economic damages caused by the escalating sanctions.
While Russia’s trade value with the GCC may not be significant in size, it is essential for Russia, especially in this volatile environment.
“Russia’s trade with the GCC was valued at $3 billion a year in 2016 and $5 billion in 2021,” said Anna Borshchevskaya, a senior fellow at The Washington Institute, in an interview with Arab News.
She added that its closest relationship within the GCC has been with the UAE, with whom Russia signed a strategic partnership in June 2018.
For the first nine months of 2021, the trade turnover between Russia and the UAE amounted to $3,769 billion, an increase of 86.03 percent compared to the same period in 2020, said Maxim Suchkov, director of the Institute for International Studies at MGIMO-University in Moscow, citing latest publicly available figures.
For Ƶ, he said the latest figure comes from the pre-pandemic 2019, when the trade turnover between Russia and the Kingdom amounted to $1,667 billion, up 58.05 percent compared to 2018.
Geopolitical experts say Russia’s economic relationship with the GCC should be seen from the prism of its ongoing competition with the West and, more specifically, the US.
From the Kremlin’s perspective, an important aspect of the trade relationships is, of course, commercial, but it also has a political perspective, explained Borshchevskaya.
“It needs someone to finance Syria’s reconstructions, and it’s been clear to the Kremlin for a long time now that the West was not going to pay for it. So it has been looking to the Gulf as a chief financer,” she said.
For Suchkov, Russia sees the GCC as a group of fast-developing nations.
“It knows that there is a lot to learn from many of them in terms of doing business, tech development, and lessening dependence on energy,” he said in an interview with Arab News. “They also hold key political capital to stability and prosperity of the Middle East, so Russia very much appreciates its regional partnerships.”
US withdrawal from MENA region: a boon for Russia?
Russia’s relations with most of the GCC states have been on a rollercoaster run, with ‘downs’ and ‘ups’ over the conflict in Syria as well as trade and oil markets regulation, described Suchkov.
In March 2020, relations between Ƶ and Russia soured over the disagreements on oil production levels. The stalemate was solved in April 2020.
“We have, however, observed some positive dynamics on this track — the GCC has grown into an important region for Russia’s economic interests. The key areas of cooperation are economic, technological and innovative development and financing,” added Suchkov.
Moscow’s relation with the GCC is often seen as part of Russia’s diplomacy as it falls within its bigger strategy in the Middle East, stated a research paper published last year by think tank SETA.
For Russia, the paper described the GCC as an important source of investments for its economy, more specifically, infrastructural projects that the country is undertaking. Most of this GCC investment is funneled through the country’s sovereign wealth fund, the Russian Direct Investment Fund, RDIF. The RDIF is nonetheless under current sanction by the US, blocking its access to the American financial system.
The RDIF not only acts as a facilitator between Russia and the GCC but also creates joint funds with other Gulf state businesses and financial entities to invest in infrastructure projects inside Russia.
RDIF’s key partners in the GCC include the UAE’s Mubadala Investment Co., Qatar Investment Authority, DP World, Ƶ’s Public Investment Fund, Kuwait Investment Authority, Saudi Aramco, and Bahrain Mumtalakat Holding Co., according to the SETA paper.
Qatar is one of Russia’s largest foreign investors (internationally and regional), with investments exceeding more than $13 billion, according to a March 22 article by Doha News.
The fact that Russia can’t deal with the West for some time, Suchkov said, opens up new opportunities for business with the rest of the world. “Agricultural exports are particularly a promising area.”
The Gulf region, along with China, is one of the main markets, in terms of potential for increasing agribusiness sector exports, said Russia’s Agroexport head Dmitry Krasnov, in a recent interview with Interfax.
The primary export commodities are barley, which made up 32 percent of exports in 2021; wheat with 25 percent; sunflower oil with 12 percent; poultry meat with 11 percent; chocolate confectionery products with 7 percent; and beef with 3 percent, according to the head of Agroexport, which is part of the Russian Agriculture Ministry.
The largest buyers of Russian farming products are Ƶ, which accounted for 77 percent of total exports to this region in 2021, and the UAE for 12 percent, said Suchkov.
‘The two are also promising buyers of Russian arms, despite their ties with the US. Obviously, the OPEC+ oil pact is a key component of the GCC-Russian relations,” he added.
Most of the UAE’s investment in Russia had been geared toward IT software development for Russian oncology and maternity centers, according to SETA, with Mubadala contributing to the development of medical clinics in Podolsk and Balashikha.
It also funded the construction of logistic complexes for Novosibirsk and Moscow districts, stated the SETA paper.
In terms of Ƶ, the Kingdom’s PIF has invested in several reconstruction projects in Russia, including the hydropower plant in the Karelian district, the petrochemical factory ZapSibNeftekhim in Tobolsk, and the transport infrastructure in St. Petersburg, according to SETA.
In September 2021, FESCO and DP World Russia signed a cooperation agreement aiming to develop joint projects focused on developing the Commercial Port of Vladivostok, which is part of FESCO Group, the largest transport operator in Russia.
Wealthy Russians also see the GCC as a safe haven for investment. “Recent reports noted that many wealthy Russians have fled to the UAE. It is also interesting that the flood of wealthy Russians to the UAE is likely helping create a stronger cultural bond,” said Borshchevskaya.
Another advantage the GCC holds for Russia is that it is strategically positioned to provide access to the Red Sea and Africa, she added.
The policy of brinkmanship between Russia and the West, particularly the US, will be sending shockwaves across different domains and industries for some time, warned Suchkov.
“International trade, including energy resources, will be affected,” he added.
Ukraine crisis exposes rifts between GCC and the US
Despite its standoff in 2020 with the Organization of the Petroleum Exporting Countries, Russian President Vladimir Putin’s approach to the Middle East has also been about building good relations with everyone in the region, pointed out Borshchevskaya.
“The (Ukraine crisis) exposed the (GCC) rift with the US, as the UAE abstained from the UN Security Council resolution condemning Russia for its invasion, while Ƶ refused to produce more oil,” she explained.
This is a reflection of a longstanding perception in the Gulf that the US is reducing its commitment to the region, and the region thus feels it cannot rely solely on the US, underlined Borshchevskaya.
“Most GCC states have adopted a wise stance,” feels Suchkov.
The ‘wait-and-see’ approach in the face of American pressure on its allies meets the interest of the Gulf monarchies a lot better than taking a more assertive stance toward Russia, he emphasized.
“Since the Arab Spring, the policies of many Gulf monarchies have matured; many have stood up for their own interests and refused to bandwagon on some Western policies,” he pointed out.
Russia seeks a greater ‘de-Americanization’ of the international system, he added.
“The conflict in Ukraine is part of this process, and the unfolding crisis would have tremendous implications globally, so we are experiencing a historical moment,” he explained.
One that will undoubtedly reflect on GCC-Russia trade relations in the future.
