Saudi offers Russia arms deal to curb Iran ties-paper

Guy Faulconbridge

Reuters North American News Service

MOSCOW, July 15 (Reuters) - Saudi Arabia has offered to award Russia lucrative arms contracts if the Kremlin curtails cooperation with Iran, a Russian newspaper said on Tuesday, but Moscow denied the offer was tied to relations with Tehran.

Saudi Prince Bandar bin Sultan met Russian President Dmitry Medvedev and Prime Minister Vladimir Putin in Moscow for talks on Monday that included the signing of a landmark deal on military cooperation.

A Russian government spokesman denied the deal was linked to Iran and said any attempt to tie cooperation with Riyadh to other issues was "not right and not proper".

Kommersant, a respected Russian daily, said Saudi Foreign Minister Prince Saud al-Faisal suggested Russia curtail cooperation with Iran at a Moscow meeting this February. The proposal was made in the name of King Abdullah, the paper said.

It said Bandar, who heads Saudi Arabia's National Security Council and is an influential former ambassador to Washington, fleshed out the proposal when he met Kremlin leaders this week.

"Military-technical cooperation between Russia and Saudi Arabia has an independent dimension," the Russian government spokesman said by telephone.

"It is founded on mutual interest and to tie this dimension of cooperation between Russia and Saudi Arabia with any other questions is absolutely not right and not proper," he said.

Observers say world and regional powers are involved in hard bargaining behind the scenes over Iran's nuclear programme, with possible trade-offs involving arms sales and competition for influence in the world's biggest oil producing region.

Oil prices are at record levels in dollar terms, driven in part by surging demand from emerging nations like China and by rising cash inflows into commodities from investors seeking to hedge against inflation and the weak dollar.

RUSSIA EYES MIDDLE EAST

Saudi Arabia, the world's top oil producer and a close U.S. ally, is wary of Iran's ambitions and shares Western concerns that Tehran is seeking to develop nuclear weapons. Iran says its nuclear programme is peaceful.

Russia, which has tried to boost cooperation with Tehran, says there is no evidence Iran wants to build a nuclear weapon but Moscow fears a conflict in the region would stoke instability close to its southern borders.

Kommersant said Saudi Arabia was interested in buying 150 T-90 tanks, 160 helicopters and air-defence systems for more than $2.2 billion.

Russia's state arms exporter, seeking an inroad into a market that has been lucrative for Britain and other Western powers, declined to comment.

Bandar told Putin on Monday that ties with Moscow had become strategic and that he would propose the King's ideas for the economic, military, energy and security fronts.

"The Kingdom's policy is certainly always to diversify its sources of arms," Bandar told Al Arabiya television.

Russia, with its rising oil income, has been trying to increase its influence in the Middle East. It had played a bigger role there before the collapse of the Soviet Union.

"Russia is also developing its relations, its dialogue, with other countries in the region, including Iran," Russia's government spokesman said.

Moscow is helping Tehran build its first nuclear power station and Putin visited both Tehran and Riyadh last year. (Editing by Ralph

Boulton)