The Bush Administration needs to monitor a new geopolitical shift that is taking place following the visit of de-facto ruler of Saudi Arabia, Crown Prince Abullah to Russia on September 1-2. Moscow and Riyadh, old rivals, now claim to have found a common agenda, which spans oil, terrorism, and arms sales.

Moscow wants to intercept money flowing to the Chechen rebels from the Persian Gulf, sell arms and attract Saudi investment. No longer sure of their close relationship with Washington, the Saudis are reaching out to the Russians. In the aftermath of the Iraq War, Riyadh is looking to balance U.S. influence in the Persian Gulf. The Saudis also hope to diversify their sources of imported weapons. They have signaled to Washington that they want to keep all geopolitical options open.

Weapons and Oil
Russia is the world's third largest weapons exporter after the United States and Great Britain, with military sales topping $6 billion in 2002. In 1997, Russia sold $4 billion, SA-10 air defense system to the United Arab Emirates, and would like to open the lucrative Saudi weapons market to its formidable arms industry.

Saudis also recognize that Russia, as the largest producer of oil outside of Organization of Petroleum Exporting Countries (OPEC) and the largest producer of natural gas, packs a lot of punch in the global energy markets. Saudi Arabia, like the United States, wants its own "energy dialogue" with Moscow.

Russian oil exports grew 8-10 percent a year since 1998. The Saudis are concerned that the more efficient Russian private sector-driven oil industry development model may spread to the Middle East.

The five-year oil-and-gas cooperation agreement signed between Russian and Saudi Arabia will allow the two fuel giants to coordinate supply of oil to the global markets. Russia will not even need to join Organization of Petroleum Exporter Countries (OPEC) to do so, although the U.S. State Department sources believe that Washington "will not be exited" if Moscow considers joining the cartel.

The Kremlin Agenda
Moscow, for its part, is driven towards a partnership with Saudi Arabia for a combination of geopolitical and geo-economic reasons. It is looking to compensate itself for the loss of influence in the Gulf with the demise of Saddam Hussein, the old Soviet client.

Russia's traditional influence and markets in secular Arab countries: Iraq, Syria and Libya, have been in decline.

Russian energy companies, flush with cash, are looking for joint ventures in the Middle East, including in Saudi Arabia, while Saudis may invest in the Russian natural resources sector, including energy, in real estate and aerospace. The desert kingdom is a perfect partner for giant natural gas development schemes under the umbrella of Prince Abdullah's "gas initiative" that includes power generation, liquid natural gas (LNG) export facilities, and gas-powered desalination of seawater.

The Chechen Connection
Most importantly, though, Moscow believes that Saudis and other rich Gulf states keep the keys to the 9-year-old war in Chechnya.  One audacious Islamist commander in Chechnya, now dead, Hattab, was a Saudi. Another top commander, Shamil Basaev, on the U.S. Department of State terrorism list, receives financial support and a flow of jihadi recruits from the Gulf. Saudi foundations and rich individuals have out poured over $100 million to support Chechen separatism between 1997-1999 alone, according to a State Department official who requested anonymity. Radical Chechen leaders, such as Movladi Udugov and Zelimkhan Yandarbiev, found asylum in Saudi Arabia.

However, Al Qaeda's May 12 terrorist attacks in Riyadh, in which over 35 people died, seemed to change the tone. The Putin Administration is now hoping to stem the financing, and decrease hostilities in and around Chechnya.

Russian-Saudi relations knew its ups and downs. The kingdom paid billions of dollars and sent thousands of moujahedeen to fight the Soviet Union in Afghanistan in the 1980s. It also crashed the oil prices down, denying the USSR its principal source of foreign cash. That conflict has provided the Saudis with U.S. acquiescence to spreading the Salafi (Wahhabi) school of radical Islam worldwide.

What to do
The Bush Administration should be aware that Russian-Saudi rapprochement may affect U.S. energy security and may diminish Russia's enthusiasm in support of U.S. war on terrorism. If successful, these ties may lessen U.S. clout in the Middle East and boost Moscow's impact.

The National Security Council should instruct the U.S. Department of State and the intelligence community to monitor and analyze the possible new developments between Moscow and Riyadh, including:

• Coordination of oil supply to the global markets and its effects on oil price formation;
• Pace of fund transfers from radical Islamist foundations and private donors in the Gulf to the Chechen rebels;
• Extradition of Chechen leaders resistance currently living in Saudi Arabia;
• Arms sales from Russia to Saudi Arabia;
• Support of Russia's application for observer status in Organization of Islamic Conference by Riyadh.

As Moscow and Riyadh discover their newfound common agenda, and pursue cooperation, the Bush Administration should remember the old adage: countries do not have permanent friends. They only have permanent interests.

Ariel Cohen, Ph.D., is a Research Fellow in Russian and Eurasian Studies at the Davis Institute of The Heritage Foundation.