Rossiya Scan: India, the Middle East and a New "OPEC"

"How The World Sees Russia" Issue #35: 11/24/2018 From the Publisher: This week’s Rossiya Scan starts with a look at Russia’s ongoing foreign policy moves. We begin by further analyzing Russia’s ongoing relationship with India. New Delhi and Moscow are getting closer. Specially in the area of security, where India is a major client of Russian military gear, and by carrying out joint military exercises. India is considered a key U.S ally in the region, and a regional rival of China. This makes Russia’s moves with India particularly interesting, as this is a relationship that has the ability to strengthen its global position, if managed right. Russia’s position in the Middle East could be at a cross-roads. With Syria becoming more stable, and Iran’s ongoing influence within Damascus, Russia might have to make a tough decision. Israel will not accept a strong presence of Iran in Syria. Russia will likely need to pick a side in order to maintain its highly influential position in the region. This is not an easy situation for Moscow, but we try to unpack it as best as possible, and offer our take. Is the West further pushing Russia away with the latest from INTERPOL? It looks like it. Russia was unable to push through its candidate to lead the international law enforcement organization much to the chagrin of Moscow. This spat is likely to further the rupture between Russia and the West, and we try to decipher the realpolitik context of this symbolic election. Finally, we take a look at how OPEC’s influence is fading, and how Russia, Saudi Arabia and the U.S are becoming the main three forces behind the price of oil. -Rossiya Scan Russian Monsoon… India is growing apart from one of its key partners, the U.S. In Rossiya Scan, we have already discussed the superiority of the SAM (surface-to-air-missile) system developed by the Russians, and how it will disrupt the status quo. The S-400 is a game changer, and is superior to the U.S's Patriot Missile. Russian President Vladimir Putin met with Indian Prime-Minister Narendra Modi, to finalize the $5 BB deal for the S-400 defense system, not abiding by U.S’s threat of sanctions. On top of the S-400 defense system, Russia has also signed another notable deal with India to sell 4 admiral Grigorovich-class frigates. These frigates are all round players, they can perform against surface ships and submarines as well as air targets, a very strategic weapon given the growing tensions in the South China sea. India is a critical ally for the U.S in its Indo-Pacific strategy, not only because of the sheer size it represents in bilateral trade, but also because it’s a counter balance for China and its BRI ( Belt and Road Initiativ e ) in APAC (Asia Pacific). Even though India historically has been closer to the U.S, a lot of military trade has been going on between Russia and India lately, bringing both nations closer. To the dismay of the Americans, India is carrying out the 10 th Indo-Russian joint military exercises. Russia also led the “Vostok 18” military games inviting its Sino neighbor, once again displaying its art of managing different leading powers in a same region, such as Israel and Iran, which we will also discuss again in this issue in a later article. However, there are many power plays in the region. On one side you have Russia poking the U.S in its backyard with India, simultaneously flirting with China. On the other hand, you have U.S pushing away India with threats of sanctions (for buying Russian military equipment and purchasing Iranian Oil), and a trade war between the U.S and China, which could have collateral damage in the region as a whole. China and India are the strongest powers in the region, it’s likely that friction will escalate between them. Notwithstanding, Russia is for the moment playing both sides wisely, whilst continuously reducing U.S influence amongst its key allies in the region . However, we believe that strategically from a defense standpoint India is of greater interest as a counter measure to China, if ever Beijing attempts to reclaim the lost ground in the Sino-Russian conflict in 1969. Read more: “Indo-Russian Military Exercise Starts,” by staff at the Economic Times . “India Signs Contracts to purchase 4 Admiral Grigorovich-class frigates from Russia," by Joanne Stocker for the Defense Post . “India, Russia Sign $950 Million Deal For 2 Guided-Missile Frigates,” by Franz-Stefan Gady for The Diplomat . “Sorry, Washington, India Can't Be Scared Away From Russia,” by Kenneth Rapoza for Forbes . Israel or Iran? Russia Must Choose... In the early part of the 20 th century, preceding World War I, the Balkans was known as the powder keg of Europe. An area with a number of overlapping claims to territories and spheres of influence between major European powers. It seems that in the 21 st century, the Middle East has become the powder keg for the world, a region which could ignite a global conflict at a moment’s notice. One way or another, all major powers are directly or indirectly involved in the numerous conflicts in the region. Russia’s role as the power broker of the Middle East presently lies at a crossroads. In Rossiya Scan, we have discussed at length the close knit relationship between Russia and Israel . We have also underlined the strategic role that Israel plays in Russia’s ambitious political agenda for the Middle East. Again, we must also consider, that the only nation that has the military might, and courage to confront Russia in the Middle East, is Israel. Despite the positive relationship between Russian President Vladimir Putin and Israeli Prime Minister Benjamin Netanyahu, strategic interests are decoupling, posing a threat to Russia’s role as the go to nation to broker solutions in this troubled region. At present, Syria is rising from its ashes, a new country is emerging. Although not to the likes of its watchful neighbor, Israel. Iran, with whom Russia has a cordial relationship, is consolidating its presence in Syria, leveraging their strong position with Syrian President Basher Al-Assad. Israel sees this as a huge threat for its national security, and will act if it feels the need to; the question is when and what will trigger an Israeli offensive in Syria, which is currently Russia’s closest ally in the Middle East. All stakeholders involved have different interests at stake in the Middle East, however some more than others. We believe that Russia has to watch carefully its relationship with Israel, which is a forced to be reckoned with, and a nation of action. The bottom line, Russia needs to position itself with one or the other, and Iran’s interest in Syria are not completely aligned with Russia’s. Russia is building strong ties with nations which are currently perceived to be always on the wrong, such as Iran, Syria, Saudi Arabia, Venezuela or North Korea. It does so to fulfill its general global geopolitical agenda, and because it knows it has the upper-hand with each. These are all players that are at odds with the West, and places that it can use to divert attention, or bargain a better deal with opposing global powers, if necessary. That being said, its work towards becoming a true global power can be seriously weakened, if it is perceived to be seen as "always too cozy" with any of the priorly mentioned troubled regimes. Also, if it does not use its influence to reign them in, if necessary. In Rossiya Scan, we do believe that Russia’s relationship with Israel is very important from a strategic standpoint. Iran must remain contained in Syria, to not shatter all the work Russia has achieved in the last few years in the Middle East. As an Israeli intervention in Syria to contain Iran, could lead to a greater conflict between Israel and Russia. Read more: “Netanyahu: Putin Can't Get Iran Out of Syria,” by Jonathan Lis for Haaretz “Israeli Official: 'There's Realistic Opportunity to Push Iran Out of Syria,” by Itamar Eichner for Ynet News . “Netanyahu tells Putin that Iran must not replace IS in Syria,” by Raphael Ahren for the Times of Israel . “Russia and Iran Are Increasingly Competitive in Syria,” by Lina Sinjab for Chatham House. INTERPOL: In Russia We Do Not Trust... This week, Alexander Prokopchuk, a Russian general was recommended to head International Criminal Police Organization (INTERPOL). Influential members of the international community expressed outrage over this possibility. The fact that the previous president was Chinese did not matter. What mattered was that the new one could be Russian. Electing Saudi Arabia to the Human Rights Council, fine, but a Russian to lead INTERPOL? Aberration! Russian has been consistently blamed for not wanting to ‘play ball’ with the West. A constant denunciation that has led to its isolation, and fueled some of its relationships with nation states that are widely (and rightfully) considered unsavory (e.g. Venezuela, Iran and Syria). That being said, the West also at times appears to not necessarily want to deal or even include Russia, as far as global leadership despite the influence that it carries. The latter is something that has to change for the sake of a more productive world. Funnily enough, when Prokopchuk failed to win, Russia decried electoral meddling. It is possible that the U.S and its European allies used their ‘influence’ to suggest that it might be better to elect a different candidate. Powers both international and regional have a knack for wanting things to go their way, whether they be Russian, American, Chinese, Indian or whatnot. Officials from several countries stated their belief and concern that Russia would ‘weaponize’ Interpol to suit its deeds, like requesting an arrest warrant against Moscow's enemies, such as U.S businessman Bill Browder . However, when China had one of its own selected nobody flinched. Let’s be grown-ups, all of these selections

Moscow, Riyadh & D.C...Are The New Dysfunctional OPEC

The price of oil is no longer in the hands of the Organization of Petroleum Exporting Countries (OPEC). It is instead managed by three world leaders whose countries can produce more than 11 million barrels a day, or more than the entire OPEC cartel. These leaders are Russian President Vladimir Putin, Saudi Crown Prince Mohammed bin Salman (MBS) and U.S President Donald Trump.

The influence that these three leaders have over the price of oil is immense. So much so, that for the past year it has been their motivations that have essentially dictated the price of this wanted commodity. The once all-powerful OPEC is now on the sidelines, and essentially hostage to the decisions of these three countries with powerful men at the helm. Thus, it is widely believed that the price of oil will be decided in next week’s G20 summit in Buenos Aires, Argentina. Instead of Vienna, where OPEC is set to have another meeting in early December.

The motivations of each of these three players are very different though.

Russia and Saudi Arabia want the price oil to be high, but not too high (note: enough to keep U.S shale oil from booming again). For oil to essentially reach a certain target price that allows them to comfortably manage their national budgets. Both are heavily dependent on oil (Russia less so) and have a need for such a price to carry out their policies (whether they be domestic or foreign). The U.S is obviously much less dependent on its oil industry, and is more of a copious consumer. After all, a higher price would mean another bonanza for its shale industry, and more jobs for many Americans, plus a probable rise in its GDP. However, Trump has made it a policy to keep oil down.

Unlike Putin and MBS, Trump has to deal with elections, and higher prices in a country with a culture or cars, and some very cold temperatures means that most Americans would directly feel the pain in their wallets.

What keeps these three from completely unilaterally running the show, as far as the price of oil, is the fact they do not see eye to on everything.

Saudi Arabia is a U.S ally and has only recently been developing its relationship with Russia. The Saudi’s are rightfully cautious, and have not dropped their American friends. The U.S might not share the Saudi view on the price of oil, but both have a common enemy in Tehran. Russia wants a similar price to Saudi Arabia, but it is an ally of Tehran, which is Riyadh's nemesis.

Unlike before though, the U.S has not been as straightforward with Saudi Arabia as far as its own strategic moves. This lack of transparency will strengthen Moscow’s position in Riyadh.

“Oil prices have indeed fallen significantly in recent weeks, and to be sure, Saudi Arabia has played a large role in that,” said Nick Cunningham, an oil and gas analyst for Oilprice.com. “Global inventories are rising once again.”

The U.S decision to soften its sanctions on Iran were well received by Riyadh, who increased output to meet the demand that would result after Iran was pushed out of the oil market.

“Riyadh is also clearly upset at being ‘duped’ by Trump. Having been convinced by the Trump administration that Iran’s oil exports were heading to zero, or at least close to zero, Saudi Arabia ramped up supply to offset the losses,” wrote Cunningham. “The U.S. then surprised the market by issuing a bunch of waivers, allowing Iran to continue to export oil.”

In January 2019, countries like Japan and South Korea are expected to resume purchasing oil from Iran. This is after both countries cut imports from Iran to zero upon the implementation of U.S sanctions. Riyadh has thus less potential clients, and a lot more oil in its hands, as a direct result of the waivers.

This lack of transparency by the U.S is likely to cost it in the future as far influence. The more Russia is straightforward with Saudi Arabia, the more likely the U.S will find itself in the outskirts of influence in Riyadh. Without a strong presence in Saudi Arabia, the U.S will continue to hold less sway in the Middle East. This is something that it cannot afford, as far as its own geopolitical interests, especially from an energy and security standpoint.

"Does the U.S Really Need Saudi Oil?" by Nick Cunningham for Oilprice.com.

"As Oil Plunges the Real OPEC Meeting Will Be at Next Week's G20," by Javier Blas for Bloomberg.

"7 Key Reasons Why the 'Bottom is Falling Out' of Oil Prices on Black Friday," by Mark Decambre for MarketWatch.