Ukraine implications for the Gulf update – diplomacy, energy and investments
As the invasion continues and the global response intensifies, Gulf states are among a core group of countries that have strong ties to both the West and Russia. While the crisis has created benefits and opportunities for them as energy exporters, it has also brought complications for their investments in Russia and created a diplomatic challenge to juggle the conflicting relationships. There are risks that their relations with US and Europe could be strained if they stick to a firmly neutral position, but equally, by maintaining lines of communication with Russia, it is possible that they could contribute usefully to mediation efforts.
• Kuwait was the only Arab country among the 80 cosponsors to last Friday’s Security Council Resolution. It has less extensive points of contact with Russia than some other Gulf states, although it has generally had good relations and was the first in the region to partner with the Russian Direct Investment Fund in 2012, albeit Kuwait is among those reluctant to normalize relations with the Russian-backed regime in Syria. Most importantly, perhaps, is the fact that Kuwait has had the experience, within living memory, of invasion by a larger neighbor.
• Attention is likely to shift to the OPEC+ meeting, putting Saudi Arabia, but also UAE and Kuwait, in focus in terms of how they deal with Russia in the ministerial meeting and in any action they take to reduce the stress in the oil market that was already building before the invasion but has intensified considerably amidst fears Russian exports could be disrupted by sanctions, despite efforts by the US and Europe to avoid that.
• Gulf sovereign wealth funds and companies are among the investors facing headaches as a result of their investments in Russia. Qatar has the largest direct positions including its 19% stake in Rosneft. Other Gulf exposure comes principally through investments made alongside the Russian Direct Investment Fund (whose website is currently down). Oman appears to be the only Gulf state without known links to RDIF.
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