Marc Goutalier on Saudi Arabia: “Riyadh aims to diversify its portfolio”

Consultant at the Observatoire des Pays Arabes (OPA), author and specialist on Saudi affairs, Marc Goutalier thinks that Riyadh would loosen up bit about Tehran. In a ByTheEast exclusive, Goutalier speaks about Putin’s visit in Saudi Arabia, Russian policy in the Middle East, the relationship between Gulf countries and with Trump's America.

Marc Goutalier Saudi Arabia Russia Riyadh Observatoire des pays arabes
Marc Goutalier from the Observatoire des Pays Arabes: "Saudis are in a bad position now. Unless they have a brilliant idea, they will probably have to make concessions." ©
ByTheEast: Saudi Arabia is currently in the spotlight. What can we expect from Russian president Vladimir Putin’s visit to Riyadh today?

Marc Goutalier: In geopolitical terms this is symbolic and naturally there are contracts involved. The Russians and the Saudis already cooperate in strategic areas, especially since the beginning of King Salman’s reign in 2015.

With Saudis engaged in discussions with Gazprom for developing a gas field in the Arctic zone, I think their cooperation will include energy. For some reason, this is a new horizon for them. The Saudis want to invest in liquefied natural gas (LNG); not only is it an alternative to oil but it is also less polluting and more sustainable as well. The Saudis are also working with Russia’s biggest petrochemical group, Sibur, with the aims of diversifying their portfolio. The partnership works well for both since Russia needs more investments while for Saudi Arabia it diversifies their economic portfolio.

Arms sales are also on the table for the past few years. Although so far the sale has not included very sophisticated weapons, but the Saudis have their own agenda. Under his Vision 2030 program, Crown Prince Mohammed Bin Salman (MBS) aims to develop an autonomous military industry. The deal with the Russians gels well with their strategic agenda since the Saudis will need every technologies and knowledge available at their disposal.

In order to develop their indigenous military program, the Saudis will need to sign technology transfer agreements which the Russians are in favor as opposed to other Western countries. Russian and Saudi interests are aligned in this deal. Already the Saudis are said to be in discussions to acquire Russia’s S400 missile system, which potentially could be a source of tension with their strategic protector: the United States. These developments show that the Saudis are leveling the playing field vis-a-vis the acquisition of weapon systems and are not content with just American weapons; this also shows that they are willing to turn their back on the Americans.

“Putin has achieved is a powerful thing: his visit to the Saudi capital just one year after Jamal Khashoggi’s murder in Istanbul is loaded with subtext.”

BTE: Back in 2011, Moscow launched its Russian Direct Investment Fund (RDIF), headed by Kirill Dmitriev, a close associate of Russian President Vladimir Putin. What are his prerogatives?

Goutalier: To make business. The Investment Fund is the arm of Russian investment abroad. On October 9, just a few days before current Putin’s visit, the RDIF opened a representative office in Riyadh, Saudi Arabia, its first overseas branch. Dmitriev is a connoisseur of the Gulf countries. It is likely that new announcements of cooperation between the two countries will be made in many areas during Putin’s visit.

The RDIF is strategic to Moscow, since it aims to pool in Russian and Saudi resources in mutual projects. This is an example of pure economic influence, especially since Dmitriev has personal ties with most of the region’s leaders. He can be considered as Putin’s personal envoy to the GCC. Naturally, he is an important player who knows his ways around the Arabs.

Russia has also launched a diplomatic initiative with Qatar, which is still under economic blockade by its neighbors; it is also seeking to diversify its partnerships in the Gulf, including with the United Arab Emirates. Qataris, Saudis, and the Emiratis are now claiming more from Russia.

It is obvious that Russians have regained a real influence in the Middle East. In the past, they drove the Saudis and Iranians to reach a consensus, especially in terms of oil prices in negotiations with OPEC. They could do it again. In any case, in diplomatic terms, what Putin has achieved is a powerful thing: his visit to the Saudi capital just one year after Jamal Khashoggi’s murder in Istanbul is loaded with subtext.

BTE: Where will the Russian diplomatic (and military) offensive in the Middle East stop? Let’s start with Syria.

Goutalier: Russians were already involved in Syria before the war, with a symbolic presence in the Mediterranean via the military port of Tartus since 1971. Today, they have got it all. Not only have they gained a significant part of the Syrian economy, the footprint of their influence continues to spread all over the region.

First of all, Vladimir Putin has the will to restore the past prestige and influence of the Great Russia; Russians are certainly not newcomers to the Middle East. Secondly, there has not been much change in U.S. policy in the Middle East since Obama; the Americans hesitate to delve into Middle Eastern affairs for fear of starting something unstoppable.

In geopolitical terms, with the United States becoming the world’s largest producer of oil, and with Israel being more than able to defend itself, Washington deems it can afford to withdraw from the Middle Eastern theater and hand over responsibility for regional stability to local allies.

BTE: Finally, Putin has made his own Obama’s strategy: being in position to talk to anyone in the region.

Goutalier: Obama’s strategy keystone was to make peace with Iran and to be able to talk to everyone, indeed. That is exactly what Putin is doing nowadays. Iranians and Russians have saved Bashar al-Assad’s regime, but since the Russian military intervention in September 2015, Russians have changed the game diplomatically. We see the result today.

BTE: And how do you consider this “result”?

Goutalier: Syria has been ravaged. Bashar el-Assad’s win is on a field of ruins and ashes, but the Russians have proven themselves to be reliable allies: unlike the Americans they came and were eager to rescue a troubled ally. This perception is reinforced by Washington’s recent move to turn its back on its alliance with the Kurds. Turkish recent attack in Syria against the Kurds is an eye opener on U.S. foreign policy. Who can the Kurds turn to now?

But we must clarify few minor points. Russia has much smaller available resources than the US. This could limit the scope of its role that it wants to play in the Middle East. Russia is moving very tactically: as early as 2015, when the war in Yemen was already underway and King Salman had just been enthroned, his son MBS flew to Moscow. MBS knocked on Putin’s door, and Putin greeted him with open arms. MBS and Putin meet each year unlike any Western leader especially in the wake of the Khashoggi murder in 2018. We may however expect more contacts next year because Saudi Arabia will host the upcoming G20 summit.

Russia has proven itself to be a dependable ally which foreign states can rely on especially when they are stuck in a tough situation. Putin is continuing to push and expand Russian influence even further. Just after the September missile attacks on Saudi sites, he had said, Russia’s S400 anti-aircraft systems could have stopped the attacks; at the same time Putin also pointed out that no evidence against Iran have been provided for the attacks. Such is play of Russian diplomacy in the Middle Eastern theatre.

“Much like Obama, Trump has proven himself to be an unreliable ally.”

BTE: Washington and Riyadh don’t seem to have the same priorities nowadays…

Goutalier: In my opinion, Saudis made a mistake by betting all on Trump. MBS has fallen prey to many personalities in the United States, especially within the Democrats. His unpredictability is scary. Yet Donald Trump has only done the bare minimum with them. Saudis thought they could buy Trump with “tremendous” contracts and investments in the United States. Once elected, Trump even booked his first official trip abroad to Saudi Arabia, because Saudis promised to invest in the U.S. economy. The numbers were however disproportionate: while investments worth hundreds of billions of dollars were hastily promised, not even a tenth of that fruitioned.

For the past year, MBS has crystallized all tensions because of the Jamal Khashoggi’s assassination. He did not expect Trump to let him down, much like Obama did with Mubarak or Syrian rebels.

For Trump, his most immediate objective is to win the next presidential elections. He is therefore launching an offensive to appeal to his electoral base, and he believes that a major crisis in the Middle East would jeopardize his re-elections chances.

Americans often made a point of showing their muscles, but this time their bluff appears to have been called. Trump believed that imposing sanctions would be enough for the Saudis to figure out their own solutions. Trump is unlikely to help them if he gets re-elected. Much like Obama, Trump has proven himself to be an unreliable ally. There is therefore no guarantee that he will respect his commitments.

From MBS’ perspective, the next U.S. election does not look very favorable: if the Democrats win, it will not be good for him; and if a Republican candidate other than Trump wins, the result could be the same. Western powers have kept him at bay since Jamal Khashoggi’s assassination. Turning to the Russians appears to be his only natural alternative, as I mentioned earlier.

A change of leadership in the United States cannot be entirely ruled out with Democrats precipitating a settlement of the Qatari and Yemeni issues (see below); in the past, Saudi Arabia had reached out to its opponents under U.S. pressure. Washington’s interests are aligned with Qatar, especially because of the Al-Oudeid military base. It is out of the question that Washington will let down Qatar. From Washington’s perspective, this conflict between allied countries is quite absurd.

Will the next U.S. president be on the same page as Obama and Trump on US disengagement from the Middle East? This is possible because the United States produces their own oil and arms sales are already assured. Peace or protection of human rights have never been strategic priorities for the U.S. in the Middle East. You can not deal with dictatorships, buy their oil, sell them weapons, while promoting peace and human rights. That’s not good for business. Does the Quincy Agreement (1945) still have a future? In its original form, no, because the United States is no more than one of the players among others, they are no longer omnipotent. Besides, as we’ve seen, the Red scare about Russia is definitely over now.

BTE: Time has finally come for the American withdrawal …

Goutalier: Not in Saudi Arabia. Since the beginning of the crisis with Iran last May, the U.S. has, for the first time since 2003, placed boots on the ground in Saudi Arabia while continuing to have a military presence in Kuwait, Bahrain, Qatar, and the UAE. Additional troops, up to 2,000 have been announced a few days ago, just after an Iranian tanker was hit by two explosions in the Red Sea. But it looks like an attempt to reassure Riyadh more than to scare Tehran. Also the Saudis are likely to pay for that mobilization.

On the opposite side, the Iranians have shown real organizational capacity. Attacks on Saudi oil facilities have changed the game strategically. Saudis are in a bad position now. Unless they have a brilliant idea, they will probably have to make concessions.

BTE: Concessions about what?

Goutalier: Concessions about their war in Yemen, because they are badly embarked there. Their Emirati ally is withdrawing and is even starting to push its post-conflict agenda in Yemen. Emiratis support the Southerner Revolutionary Movement in Aden, they also negotiate with Houthis, they intend to impose their will and have a way out of the crisis.

In the United States, Congress is standing up against this war, Trump has vetoed bipartisan laws voted by Congress, he is in trouble on the Gulf theater. In view of his re-election he has no interest to generate a major crisis in the Middle East. That’s why he does not want to oppose Iran head-on.

BTE: So bringing an end to Yemen’s war could be in sight?

Goutalier: Trump is likely to certainly appreciate a diplomatic way out of the Yemen war. The Saudis are bogged down with it and would like a face solution exit plan. Are King Salman and his son Crown Prince MBS ready to settle peace and to smooth things over with Iran? It’s a possibility.

In this context, there are other actors who want to play the role of mediators. Pakistan, for example, wants to keep good relations with both sides given the dependency of its energy industry on crude oil. Then there is Russia, a player that would be fool hardly to ignore.

“In reality, with this blockade, Saudi Arabia pushed Qatar into Iran’s arms.”

BTE: You also have mentioned Qatar among other countries. Doha is under blockade since June 2017. But this blockade is not complete as it was in Lebanon during 2006 July war by the Israeli Navy. So it won’t reach its objectives. How to end this specific crisis?

Goutalier: Qataris were very reactive when the blockade was imposed. They quickly established new trade routes with all the partners they still had. They were able to do so because the north facade towards Iran remained wide open. Although initially Qataris and Iranians were not the best of friends, Iranians opened their doors given the new strategic dynamics in the region of Gulf countries hell bent on tearing each other apart.

The biggest defect of this blockade is to leave the gas industry untouched: for Qatar, it is the goose that lays golden eggs. This blockade was not well conceived much like Saudi Arabia’s war in Yemen. The war should have been over in a few weeks at most and should have turned the tables in favor of Saudi Arabia. The war is in its 5th year, clearly it did not go as planned.

The blockade on Qatar followed a similar pattern: an ill-conceived blockade resulted in Qatar adapting to the situation. For Saudi Arabia, the question, in both scenarios, is the same: how will it resolve the situation without losing face?

Ending this crisis may be part of a larger peace deal or part of a more comprehensive agreement with Iran. But it is primarily a matter specific to the GCC, it marginally concerns Iran. Saudis and Emiratis were already pointing out Iran of being too close to Qatar. In reality, with this blockade, they pushed Qatar into Iran’s arms. Qatar’s truly friend in the region remains Turkey, but that’s another story.

Initially, Emiratis were more hostile to the Qataris than the Saudis; speaking of Qatar in the UAE is even criminalized – it is a total taboo. While the Emiratis were involved in Yemen thanks to the Saudis, the tables have turned since the blockade of Qatar. Logically, the solution to this crisis should come from Saudi Arabia.

Despite the fact that the Saudis and Emiratis tried everything to hurt Qatar, including playing the tribal rivalry card of within Qatar, but the Qataris outmaneuvered them with a movement of “Rally around the flag and the Emir”. The blockade also generated new business opportunities for Qatar and placed them in a stronger position in most fields. The Saudis and Emiratis even tried to “weaponize” social networks; they also launched an illegal network to compete with BeIn Sport (it still exists in Arabia: BeOutQ – Q for Qatar!).

From an external Western standpoint, it all looked like little wars between states that should not fight each other. But, in local terms, tension are still very high, and are likely to leave a stain – just like the Kuwaitis still being haunted by the fear of being invaded since its invasion by Iraq in 1990.

From a Saudi Arabian perspective, it boils down to Riyadh facing two strategic quagmires: a military one in Yemen and a diplomatic one in Qatar.

BTE: Saudi Arabia has been hit hard by the drone attacks, whose origin is still uncertain. How do you assess the vulnerability of open pit Saudi oil facilities?

Goutalier: Attacks on the Khurais oil field and the Abqaïq factory took place in the middle of the night. These sites are massively lit: in the middle of the desert, they are easy targets. Admittedly, these sites are covered by anti-aircraft systems. It’s even more humiliating that they could have been hit. For Saudi national security, this is an unambiguous warning.

There are two things to consider: the quality of the protective gear and the quality of the personnel who manage these missile defenses. The equipment is American, while the staff is mostly Saudis who are not well prepared.

The Saudis did not expect such an attack because it simply never happened in the past. The level of competence is unfortunately questionable. It was the same in Yemen: bombing cities from the air is easy, but achieving strategic goals on the ground is a whole different ballgame! They needed the support from the Emiratis who are much more competent. The equipment quality is also debatable as the available anti-missile defenses are mainly Patriot missiles that were designed at a time when the main dangers were ballistic missiles (Scud). Of course, these missiles remain a threat in the region. But drones or cruise missiles flying at low altitude are much harder to stop.

It is clear to anyone that a strong organization was behind September’s attacks in Saudi Arabia, which surprised even Israelis who did not expect such an elaborate scenario. Israelis also have to redesign their defense strategy. The Dimona nuclear power station in the Negev Desert could be exposed which would be catastrophic for the whole region. Current equipment does not respond to the magnitude of this actual asymmetric threat.

BTE: Drones became the weapon of the poor against very rich states?

Goutalier: For a long time, drones have been the preserve of Americans. Since 2010, competitors have emerged. Chinese have moved quickly to export drones to Middle Eastern countries. Countries are also developing their own programs, such as Turkey. The very first risk is the small-scale drones, as ISIS had or the Houthis have in Yemen, for example. There are different types of drones, for observation or for attack. Armed drones are obviously the most complicated to develop.

September’s attacks would not have come from the Houthis in Yemen, unlike previous attacks because it was not the first one to occur. They may have been coordination between the Iranians and the Shiite militias in Iraq who are geographically closer to the Saudi oil sites. Even Washington does not seem to know for sure where the attack originated. There were obviously failures on the Saudi side and the American side because the U.S. also have troops in the area.

“Russia’s ability to not depend on foreign imports is very attractive to the Saudis.”

BTE: Putin and MBS will discuss in Riyadh about cooperation, and MBS will certainly push his Vision 2030 plan once again into discussions. They will talk about the development of agriculture, and enhanced cooperation between the two countries and skills transfers. What is the political interest behind this?

Goutalier: Saudis are looking at the Russian experience with interest. Since the imposition of sanctions on Russia by the West following its annexation of Crimea (Ukraine), the Russians have invested in developing their cereal industry and have become self-sufficient up to a point. Russia’s ability to not depend on foreign imports is very attractive to the Saudis.

But Saudi Arabia does not have the territories nor Russia’s iron will. In the past, the Saudis had launched programs to be self-sufficient in freshwater resources, but they gave up. They are afraid of creating chinks in their supply chain of sourcing of raw agricultural materials such as wheat. Last April, when Sudan was hit by political instability, the GCCs feared for their supply since they farm a lot of arable land in that country, south of Khartoum. Agricultural cooperation can therefore be a source of stability.

BTE: Saudi Arabia has split its Energy Ministry in two, and now has a full-fledged Ministry of Industry and Mineral Resources. Excluding oil and gas, what natural resources does Arabia have?

Goutalier: Saudi Arabia has several resources, such as iron, copper, gold, but also rare-earth, phosphate and uranium. The transfer of skills can indeed be done in the mining field where the Russians have a great expertise and experience as well.

As part of Vision 2030, MBS also wants to develop the mining sector. A few months ago, the Saudis had announced billions of dollars in investments into the mining industry. As always, the main goal is to contribute to the diversification of the country’s economy and to reduce the dependence on the outer world.

BTE: Saudis have uranium? What can they do with it?

Goutalier: Yes they have uranium underground. But no one communicates about the Saudi nuclear program at the moment. But they claim that they have sufficient uranium reserves to develop their program.

BTE: Are Saudis developing other industries as part of this diversification policy?

Goutalier: They have many projects. They want to be an important technological hub. They also claim to have very large gas resources, even though the first surveys were inconclusive. They may bluff to woo investors. It’s hard to say as their promises of transparency have yet to be delivered.

Something to read

Quand le printemps brouille les cartes, une histoire stratégique des frontière arabes
by Marc Goutalier (2017, Editions du Félin)

About the Observatoire des Pays Arabes

Created in 1992, the Observatoire des Pays Arabes (OPA, Arab Countries Resource Watch) is a consulting firm specializing in Arab and Islamic issues, and Islamist terrorism as well. Its expertise covers regions including Maghreb, Middle East and GCC. OPA is run by French-Lebanese geopolitical analyst Antoine Basbous.
Source: official website