Oil and Gas Pipeline (wikimedia)

Geopolitical Machinations from Riyadh to Ankara and Moscow to Beijing

Foreign minister Adel Al-Jubeir could not be clearer about Saudi Arabia’s view of Bashar al-Assad’s future: there are no circumstances where Bashar al-Assad can remain in power — whether his exit is through politics or by force. Turkey also has been unequivocally clear about Assad’s future. Both Turkey and Saudi Arabia also have been equally clear about their opposition to Russia’s intervention in Syria and its consequences. Both have said that Moscow’s support for Assad and its bombing campaign in support of his regime was a “big mistake.” Both Sunni Muslim powers support the moderate opposition in Syria.

All of this talk about Russia’s disruptive role in the Syrian conflict has been fed by a geopolitical undercurrent that rarely surfaces in the media, and is likely to become increasingly important as a factor in Moscow’s future Middle East policy and relationships with Saudi and the Gulf region: the growing oil competition between Saudi Arabia and Russia. The wild card in the future of Russian-Saudi oil competition will be Iran after sanctions are lifted and it re-enters the global oil and gas market. Russia’s strategic intentions are to partner with Iran in the development of export routes through pipelines across Syria and through Syrian ports. But like Russia’s other strategies for expanding its energy export channels and markets, the outcomes are uncertain.

The Saudi share of the European crude market has been dropping for decades and Russia’s has been growing. Whereas in the 1970s, Saudi Arabia sent half of its oil to Europe, the Soviet Union built pipelines from West Siberian oil fields to European markets, forcing the Saudis to switch to Asian markets where demand at better prices was growing. Then, with the European Union trying to reduce its reliance on Russian energy, Poland starting to import heavily discounted Saudi oil and reached an agreement with Lithuania, Latvia and Estonia to build a natural gas pipeline to and from the Baltic States.

The goal is future independence from Russian gas supplies. In the interim, Saudi gained Eastern European customers with its heavily discounted prices. At the same time, in Asian markets Russia has become a serious competitor to the Saudis, reinforcing the Saudi’s price war aimed at increasing market share. In the perspective of competition for energy markets, Saudi Arabia and the Gulf states are at war with Russia, a war that for all of the combatants could be more consequential than the Syrian conflict.

As part of Russia’s strategy, and this is just my speculation, Russia will seek to block the Saudis from establishing energy export routes in Syria. Russia wants a much larger share of the European oil and gas market which it has been losing to Saudi in recent years as Saudi sells its energy products at a steep discount. Saudi is becoming very aggressive about its oil export competition with Russia. Just as President Vladimir Putin tries to restore Russia as a major player in the Middle East, Saudi Arabia is starting to attack Russia’s traditional stomping ground by supplying (rather dumping) lower-priced crude oil to Poland.

United opposition to the Russian bombing campaign has intensified a rapprochement between Turkey and Saudi Arabia that has gained pace over the last months. Possibly behind the closer relationship between these two countries is their respective relationships with Russia in the sphere of international energy trade. In addition to escalating Russia-Saudi energy export competition, Turkey and Russia announced a deal in December 2014 to construct “Turkish Stream” — four strings of gas pipelines, only one of which would go into Turkey, and the other three would pass through Greece to the European market. This deal has stalled recently for a variety of reasons and provides Turkey with one more reason to draw closer to its Muslim brother, Saudi Arabia, rather than Russia.

In a December 2014 meeting, Putin promised the Turks to sell them gas they already were receiving at a 10.25% discount. Turkey wants the discount before signing the pipeline deal. Putin wants a signed deal for all four pipelines before giving Turkey the discount. Sixty percent of Turkey’s gas comes from Russia to generate 45% of Turkey’s electricity. Putin also wants Turkey’s help to negotiate gas deals in Europe. Russia also needs help selling the three other pipelines to European customers. Turkey has not agreed to either of these demands.

Further complicating Russia’s execution of the pipeline deal is that Qatar, with the third largest gas reserves in the world, also is a big competitor for Russia, with the advantage of shipping liquefied natural gas anywhere in the world, bypassing land routes. Russia currently ships gas to Europe through Belarus and the Ukraine, but can’t rely on that continuing. Facing a dramatic global drop in gas prices, Russia may not have enough capital to build the alternative four pipelines. Nord Stream 1, a Russian pipeline, and now the $11 billion Nord Stream 2, under the Baltic Sea, will double supplies of Russian gas to Western Europe, and will provide an alternative to “Turkish Stream.” Germany wants “Turkish Stream” scrapped and replaced by Nord Stream I and 2. Turkey is faced by a plethora of expert international energy opinion telling it that the “Turkish Stream” project is not feasible and should be abandoned.