Trade, Investment and Politics: Prospects for Russian Economic Cooperation with the Gulf

Russia’s economic relations with the Gulf countries are thin. The fundamental problem is that Russia’s economic offer to the region lacks appeal: the sides’ economic structures are non-complementary (both are oriented toward the extraction and export of raw materials, primarily hydrocarbons); and Russia’s manufacturing sector is largely uncompetitive. Meanwhile, Russia is not perceived to be an attractive destination for would-be Gulf investors. For this state of affairs to change, it will be necessary for the Russian authorities to embrace far-reaching domestic economic reform: to increase the productivity and competitiveness of its manufacturing industries; and to improve the investment climate in Russia. Neither is on the cards: the Kremlin has effectively ruled out reform as politically and socially destabilizing. Consequently, Russia will have to rely disproportionately on geopolitical maneuvering to defend and promote its interests in the Gulf. Although Russia’s diplomatic prowess should never be underestimated, its weak economic relationships with the region will limit its influence there.