Saudi Arabia and Russia, the world's two biggest oil exporters, have begun historic talks in Moscow.
Both states are heavily dependent on oil
Crown Prince Abdullah, the desert kingdom's de facto ruler, is making the first visit to Russia by a Saudi leader since Soviet times.
Ties have been strained in the past by the conflict in Chechnya but both he and President Vladimir Putin praised each other's states when they met on Tuesday.
Their oil ministers also signed their first formal market agreement, pledging to co-ordinate supply and closely monitor world prices.
Both states are heavily dependent on oil with Russia's economic recovery since its 1998 economic crisis largely due to soaring output and the high price of crude oil.
Also agreed in Moscow was the creation of the first Russo-Saudi consortium in which Russia's leading gas pipeline builder and leading Saudi construction companies will join efforts to develop Saudi gas fields.
Correspondents note that the oil agreement is the first formal recognition of a fragile alliance between the two states which has kept oil prices high in recent years.
One Russian business newspaper, Kommersant, predicted the "creation of a new global powerhouse... [based on] a
combination of Saudi finances and Russian high technologies".
"This day will go down in history as it opens a new era in Saudi-Russian relations," said Crown Prince Abdullah at his talks with Mr Putin.
He recalled that the Soviet Union had been the first nation to recognise the infant Saudi Government.
President Putin said his country viewed Saudi Arabia as "one of most important Muslim nations".
"We have always considered the Muslim world, the Arab world, as one of our most important partners," he told the crown prince.
It is expected that the two leaders will discuss the issue of fighting terrorism during the visit, which ends on Thursday.
The BBC's Steven Eke reports from Moscow that Russian diplomats may be expecting a clarification of Riyadh's stance on Chechnya.
Russia has long suspected Saudi financiers of backing separatist rebels in its mainly Muslim Chechen region.
Russia, our correspondent reports, believes it can benefit from the cooling of Saudi Arabia's relationship with Washington in the aftermath of the 11 September terror attacks.
Billions of dollars of Saudi money have been pulled out of the United States and Russia wants to offer itself as an attractive new destination.
Russian analysts also argue that closer links with Saudi Arabia are the key to restoring Moscow's diminished influence in the Middle East.