Balance of power: Gulf states, Russia, and European energy security

While Europeans are concerned about the geopolitical and military implications of Russia’s full-scale invasion of Ukraine, they are already paying a high price in two other domains: energy and the economy. Faced with Russia’s attempts to weaponise its energy supplies, Europeans are now determined to end their dependency on Russian gas. The European Union recently formalised a commitment to slash imports of Russian gas by two-thirds by 2023. Russian oil – which in 2020 accounted for 25 per cent of the EU’s total purchases of the product – has already been sanctioned by the United States and self-sanctioned by buyers, which fear disruptions to production. These dynamics combined with pre-existing imbalances in energy markets to push oil prices to $130 per barrel in the first week of March.

As a result of all these factors, Europe’s consumers and companies have seen their energy bills skyrocket. The West turned to major energy producers and decades-long partners in the Gulf, only to discover – much to its disappointment – that they were reluctant to pick a side in the war.

The Russian government, which draws 40 per cent of its revenues from oil and gas exports, reached out to Qatar, the United Arab Emirates, and Saudi Arabia to discourage them from confrontational behaviour in the energy market. President Vladimir Putin sent a letter to the emir of Qatar, Tamim bin Hamad Al Thani, ahead of the February 2022 meeting of the Gas Exporting Countries Forum. Qatar, the world’s biggest supplier of liquefied natural gas (LNG), has declared its willingness to contribute to European energy security in case of a disruption of Russian supplies, while emphasising that it would not be able to help unilaterally. Qatar has little spare capacity on the spot market for LNG – which is currently trading at sky-high prices – but European states are considering whether to engage with the country’s Asian customers to reroute large quantities of gas supplied under contract.

Saudi Crown Prince Muhammad bin Salman and his Emirati counterpart, Muhammad bin Zayed, both spoke to Putin before reaffirming their commitment to a production schedule deal signed in 2020 by Russia and members of the Organization of the Petroleum Exporting Countries (OPEC) in the OPEC+ format. At that time, Riyadh forced Moscow to the negotiating table by flooding the oil market with supply to collapse prices – and even by directly selling to Russia’s traditional customers in eastern Europe. The deals Saudi Arabia signed this year with Polish company Orlen and Danish firm Kalundborg Refinery would now put Riyadh in an ever stronger position to access markets in Poland, the Czech Republic, Lithuania, and Denmark.

Yet Riyadh now claims that it does not want to politicise oil and upset the balance within OPEC+. It has rejected multiple calls to raise oil output to drive down prices – which came in the form of a phone call between US President Joe Biden and King Salman; a visit to Riyadh by White House Coordinator for the Middle East and North Africa Brett McGurk and the State Department’s energy envoy, Amos Hochstein; and a phone call between French President Emmanuel Macron and the crown prince. British Prime Minister Boris Johnson has also joined the fray, travelling to both the UAE and Saudi Arabia in the hope that his personal relationships with the country’s rulers will do the trick.

Despite Gulf monarchies’ hesitation to change course, they do not regard Russia as a strategic partner. These states have four main interests linked to Russia: cooperation on energy policy, access to military technology, investment, and coordination on geopolitics. Russia has reduced its agency in all these areas by launching an all-out war on Ukraine. Moscow is an important interlocutor for Qatar in the Gas Exporting Countries Forum and for Saudi Arabia in OPEC+, but it is also a competitor. If, as is widely predicted, the green transition causes the oil market to shrink in the years to come, Russia and Saudi Arabia are set for a long-term battle over market shares.

Despite signing strategic agreements with Saudi Arabia and the UAE, Russia is not in a position to replace the US as a regional security guarantor or a strategic defence partner. Russia’s endgame in Syria and Libya is in line with that of the UAE, but their policies are opportunistic. While Russia may have recently tried to use the Iran nuclear deal as leverage against Western sanctions, it has long resisted Saudi attempts to contain Iran geopolitically. Indeed, Gulf monarchies’ refusal to side with the US and Europe against Russia is not about Russia. It is about navigating the new multipolar world order, taking a transactional approach to protecting national interests, and avoiding the costs of strategic alignment.

Gulf states see the US as committed to retrenching from its traditional role as the Middle East’s security guarantor – meaning they believe Washington has less to offer and less to threaten than it once did. In reality, they are likely to quickly see the limits of extreme hedging.

Europeans – who have far less influence than the US in the Gulf – can speed up this reckoning. They should deliver a clear message to Gulf states that forging a strong energy partnership with Europe now would not only be a short-term attempt to outfox Russia but also an element of a decades-long strategy for the green transition – one that would minimise the risks of political and economic instability, especially in the Gulf. To deliver this message, European Commission Executive Vice-President Frans Timmermans and Energy Commissioner Kadri Simson should go ahead with a visit to Saudi Arabia that was initially planned for the third week of March but could be delayed due to Russia’s war on Ukraine.

Energy will feature prominently in the upcoming EU-GCC Joint Action Programme, given that European countries see Gulf monarchies as key sources of green energy and investment partners in this sector. European leaders can still edit the document, which should be published soon, to expand their engagement with Gulf states on energy issues. They should offer Gulf states a more appealing compromise on carbon pricing and the phase-out of hydrocarbons, as well as a stronger strategic commitment to trade in green energy, electricity, and LNG. Through this kind of clear-eyed consistency, Europe can encourage Gulf states to abandon extreme hedging.