Saudi Prince Sets Back Putin's Middle East Agenda At Doha

Russian President Vladimir Putin, right, and Saudi’s Second Deputy Prime Minister and Minister of Defense and Deputy Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud pose for the media after the Formula One Russian Grand Prix at the Sochi Autodrom, in Sochi, Russia, Sunday, Oct. 11, 2015. (Alexei Nikolsky, RIA-Novosti, Kremlin Pool Photo via AP)

The Doha “oil freeze” talks ended with the worst possible outcome
—not in terms of the oil market but for regional geopolitics and Russia-Saudi relations. After running several hours overtime, negotiations ended without an agreement due to the inability of Russia and Saudi Arabia to agree on the language of a final draft. The failure to find common ground hinged on Saudi demands, made on the morning of the talks, that Iran must agree to eventually freeze output as a precondition to a final agreement. While this may seem a reasonable request on its face, it was consider an unreasonable and unacceptable last minute change by Moscow.
Russian Energy Minister Alexander Novak specifically laid the blame for the breakdown in talks on Saudi Arabia and other Arab Gulf states— United Arab Emirates, Kuwait, and Qatar—that effectively blocked a final deal. Expressing reserved disappointment, Novak still could not hide his sense of personal indignation. After all, the hardline position taken by Saudi Arabia was the “undoing of two months of negotiations.”  It is evident from the order of events and public statements over the past two months that the Kremlin has been negotiating with the expectation that a deal with or without Iran was within reach.
According to the details revealed by Azerbaijan’s Energy Minister Natig Aliyev in the Russian media prior to the talks, the draft agreement would have frozen production at January output levels for six months until October but with no enforcement mechanisms. The draft agreement called for a follow-up meeting to be held during October in Moscow.
This begs the question: did the Kremlin misread the signals from Riyadh or was it overconfident in its ability to forge consensus and push through a deal? Fresh off a string of foreign policy exploits that caught the world by surprise (annexing Crimea and intervening in Syria), Moscow’s judgment could have been compromised by hubris.
However, Novak’s miscalculation was most likely in basing his read of the situation on his personal interactions with Saudi Energy Minister Ali bin Ibrahim Al-Naimi, a well-known and respected energy minister. The disruptive variable was the intervention by Saudi Deputy Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud (MbS), which highlighted that al-Naimi no longer exercises the same autonomy over Saudi oil policy as in the past. There is no indication that Novak, or even Russian President Vladimir Putin or Russian Foreign Ministry Sergei Lavrov, have a clear read on MbS, much less an established and trustworthy relationship. It also does not appear that the Kremlin conferred directly with MbS prior to sending Novak to Doha, tasked with negotiating a final deal.

Recommended by Forbes

Many, including this analyst, assumed that the parties would at least sign a non-binding “agreement in principle” rather than walking away empty-handed. If stabilizing near-term crude prices was a primary concern, the parties could have easily crafted a malleable agreement that would have allowed the opposing sides to save face while giving the market a positive headline to prevent a sell-off in Monday morning trading.
Instead, Russia and Saudi Arabia chose to risk the financial loss and stick to their positions. Why? Because the breakdown in Doha talks was over geopolitics, not differences over oil market management. Still, Saudi Arabia’s last minute ultimatum undoubtedly appears irrational or even impetuous to many Middle East hands and market players. It presents a credibility issue for Saudi Arabia and has raised questions about al-Naimi’s future role in Saudi oil policy as well as OPEC’s relevance.
The key takeaway is the decisive role that geopolitics played at Doha. Under MbS, it appears that Saudi oil policy will follow free-market principles to the extent that it advances Riyadh’s geopolitical and geoeconomic objectives vis-à-vis Iran. The breakdown in Doha will likely spur intensified competition between Saudi Arabia and Iran for market share with rising production and competitive pricing. It also foreshadows heightened geopolitics tensions as the two rivals clash in proxy wars in Syria, Yemen and beyond.