Analytical Brief, n.28, June 2023

On the 6th of June, 2023, the Iranian embassy in Riyadh officially reopened after a seven-year hiatus. Ali Reza Enayati, former Deputy Foreign Minister of Iran and Ambassador to Kuwait, assumed the role of Extraordinary and Plenipotentiary Ambassador of the Islamic Republic of Iran to Saudi Arabia. Faisal bin Farhan, the Saudi Arabian Minister of Foreign Affairs, extended a formal invitation to President Ebrahim Raisi to visit Riyadh, an invitation that was graciously accepted. Three months prior to this event, on the 10th of March, 2023, Iran and Saudi Arabia agreed to reinstate diplomatic missions and commence a dialogue toward normalizing their relations.

The accord was officially signed in Beijing by Ali Shamkhani, the Secretary of the Supreme National Security Council of the Islamic Republic of Iran, and Musaed Mohammed al-Aiban, the Secretary of the National Security Council of Saudi Arabia. Facilitated by Chinese mediation, this agreement saw the significant involvement of Wang Yi, the former Chinese Foreign Minister and a current member of the Political Bureau of the Communist Party, responsible for foreign policy.

Undoubtedly, this agreement marks a momentous diplomatic and foreign policy breakthrough. The relations between the two major powers in the Middle East have been riddled with contradictions since Iran’s Islamic Revolution in 1979. In the early 21st century, these relations took on a confrontational nature, primarily due to the rise of Shiite parties and pro-Iranian armed groups in Iraq following the American occupation, as well as the events of the "Arab Spring" and Saudi Arabia’s intentions to topple the government of Bashar al-Assad in Syria, which prompted an escalation of Iran’s involvement in the region. Official diplomatic ties were severed in February 2016, following the execution of a prominent Shia cleric, Sheikh Nimr al-Nimr, in Saudi Arabia, followed by attacks on the Saudi embassy in Tehran and the consulate general in Mashhad.

The joint statement issued by Iran and Saudi Arabia subsequent to the Beijing negotiations encompasses several key points. Firstly, both parties agree to restore diplomatic relations and establish embassies. Secondly, they commit to respecting each other’s sovereignty. Thirdly, the bilateral Security Agreement from 2001 is being reactivated. Fourthly, there will be a concerted effort to enhance the implementation of agreements pertaining to economic cooperation, trade, investments, science, and culture, initially concluded in 1998. Lastly, the three states involved—Iran, Saudi Arabia, and China—pledge to exert their utmost endeavors in supporting and promoting peace and security within the Middle East region and on an international scale.

Of particular significance is the final article, as it transcends the scope of bilateral relations. Over the past four decades, starting from the Camp David Accords in 1979, the United States has predominantly assumed the role of chief peacemaker and security guarantor in the Middle East. However, this role is now undergoing a shift towards China. The exponential growth of Chinese influence in trade and, particularly, in technology across Western Asia has played a pivotal role in Beijing’s unprecedented diplomatic triumphs. China’s adeptness in leveraging its "soft power" accumulation has proven instrumental in these achievements.

Of paramount importance is China’s capacity to facilitate the technological transformation of regional economies, which serves as a crucial factor in its diplomatic endeavors. China’s direct vested interest in regional stability is primarily attributed to its reliance on Middle Eastern oil. China is keen to avoid any regional conflicts that could disrupt its oil supply routes. However, Chinese ambitions in the region extend far beyond mere energy security and encompass broader aspirations, such as expansion and the integration of local industries into its "China-centric project."

Reasons for normalization

The normalization of relations between Iran and Saudi Arabia can be attributed to several key reasons. Firstly, Iran’s motivation stems from its desire to secure its southern flank, particularly the Persian Gulf, considering the complex economic and domestic political situation it faces. The reimplementation of crippling economic sanctions by the Trump administration in 2018 resulted in the devaluation of Iran’s national currency, rampant inflation, and a significant decline in the standard of living. The autumn of 2022 witnessed widespread social protests fueled by economic turmoil and youth dissatisfaction with political stagnation. Given these circumstances, continued confrontation with Saudi Arabia would entail substantial costs for Iran’s political elite, who are now seeking to prioritize internal matters.

Secondly, Iran’s leadership confronts new foreign policy challenges in its relations with neighboring countries. The emergence of Azerbaijan’s strengthened position and its strategic partnership with Turkey, following the Second Nagorno-Karabakh War, present a significant concern for Tehran. Simultaneously, tensions have escalated with Afghanistan, following the establishment of the Taliban regime, thus posing another potential conflict point for Iran.

Thirdly, Iran views the signing of the Abraham Accords in August 2020 and the potential alliance between Bahrain, the UAE, and Israel, with the eventual inclusion of Saudi Arabia, with great apprehension. The presence of Israel in the Persian Gulf, on Iran’s southern flank, is highly undesirable for Iranian interests.

On the other hand, Saudi Arabia’s decision to normalize relations with Iran is primarily driven by Crown Prince Mohammed bin Salman’s desire to focus on modernizing the kingdom and diversifying its economy. Since 2015, the kingdom has pursued an aggressive external and internal policy, engaging in a hot war in Yemen and a cold war with Qatar. However, neither of these conflicts has yielded the desired outcomes for Saudi Arabia. Presently, the Saudi government’s priorities include implementing the economic program «Vision 2030» and reducing the economy’s unilateral dependence on oil exports. In light of these circumstances, the Saudi leadership aims to resolve the protracted conflict in Yemen expeditiously and sees potential assistance from Iran, given its significant influence over the Houthi rebels in Yemen.

Furthermore, a sense of disillusionment has permeated the Saudi elite regarding the outcomes of their longstanding confrontation with Iran. Riyadh’s efforts to change the regime in Syria, remove Hezbollah’s armed groups from Lebanon, and diminish Hezbollah’s influence in domestic politics have proven futile. Additionally, Saudi Arabia has been unsuccessful in ending the dominance of the Houthi movement in northern Yemen.

Moreover, attempts to undermine Iran from within have yielded little success. Mass protests that erupted in the Islamic Republic last autumn, sparked by the killing of Mahsa Amini, gradually dissipated, and opposition groups such as the Mujahideen-e-Khalq failed to garner significant support.

The decision of Riyadh to normalize relations with the Islamic Republic was further influenced by the disappointment of Arab monarchies in their strategic partnership with the United States. For decades, the Kingdom of Saudi Arabia (KSA) and the UAE relied on the United States as a guarantor against threats from Iran. However, Washington’s actions have significantly undermined this confidence. In September 2019, Houthi drones targeted Saudi Aramco facilities in Khurais and Abqaiq. Despite Saudi Arabia’s appeals, the US did not initiate military action against Iran. The Gulf monarchies’ elites concluded, following the US withdrawal from Afghanistan in August/September 2021, that they would need to ensure their national security independently.

Potential outcomes

Regarding the potential outcomes of the Iran-Saudi agreement, there has been a noticeable activation of Iran’s trade and economic cooperation with the Gulf monarchies over the past year. In the Iranian calendar year 2022-2023, which concluded on March 20, Iran’s trade with the Gulf Cooperation Council (GCC) countries reached $35 billion. The United Arab Emirates (UAE) stands as Iran’s primary trading partner in the region, with $24 billion in trade. Following the return of the UAE ambassador to Tehran in 2021, the UAE-Iran Business Council was established. Since 2017, Qatar has emerged as a significant trade and economic hub for Iran, especially in the aftermath of the Qatari diplomatic crisis from 2017 to 2021. When Saudi Arabia, the UAE, and Bahrain imposed a blockade on Qatar, Iran became a major supplier and transit point for food supplies to Qatar. Presently, there are 800 Iranian companies operating in Qatar, the Qatar-Iran Business Council has been established, and Iran has opened a representative office of Qatar Tourism. Oman is also becoming an important business hub for Iranian ventures. The Sultanate has lifted numerous restrictions on Iranian companies conducting business, resulting in a bilateral trade volume of $1.3 billion by March 2022, reflecting a 53% increase compared to 2021.(1)

If the positive trend continues, it is possible for Iran’s economic relations with Gulf countries to reach new heights. There is a potential for significant investments from Saudi Arabia into the Iranian economy in exchange for access to Iranian nuclear technologies. However, the lifting of banking and trade sanctions imposed on Iran by the United States and its allies is crucial for the full development of such cooperation.

In the military and political sphere, there is an opportunity for cooperation between Iran and the Gulf Cooperation Council (GCC) states to ensure the security of the Persian Gulf region and foster mutual trust. Vice Admiral Shahram Iran of the Iranian Navy stated on June 3, 2023, that Bahrain, Iraq, Pakistan, Saudi Arabia, Qatar, and the UAE are planning to form a maritime alliance with Iran. The commander emphasized that regional states have recognized the need for cooperation to bring security to the region.(2) If the idea of creating a regional alliance becomes a reality, it would question the necessity of the presence of the US 5th Fleet in the Persian Gulf, raising concerns about the US military presence in the region.

In the regional context, a reconciliation between Iran and Saudi Arabia could lead to a de-escalation of tensions in Syria, Iraq, Lebanon, and Yemen, where these countries have experienced conflicts fueled by proxy groups supported by Iran and Saudi Arabia.

It is noteworthy that the normalization of Iran-Saudi relations coincided with Syria’s restoration of membership in the League of Arab States (LAS). Saudi Arabia and the UAE still hope to diminish or at least reduce Iran’s presence in Syria through peaceful means, using promises of loans and investments. Interestingly, Riyadh and Abu Dhabi do not oppose the Russian military presence in Syria, considering it a counterbalance to Iranian influence. It is important to mention that Saudi Arabia’s relations with Syria have not always been negative. In the 1990s, both countries collaborated on the Lebanese issue, and Saudi investments flowed into Syria. However, the government of Bashar al-Assad appears hesitant to engage in a partnership with the Arab monarchies actively.

Resentment over the Gulf monarchies’ support for armed opposition and terrorist groups between 2011 and 2017, coupled with the realization that they cannot fully participate in the reconstruction of the Syrian economy under American sanctions, are contributing factors. In the case of Lebanon, a thaw in Saudi-Iranian relations could lead to a compromise on the Lebanese front, facilitating the election of a president and the formation of a functional government.

Possible Scenarios

The development of relations between Iran and Saudi Arabia can unfold in three different scenarios.

1) Gradual progress and comprehensive cooperation. In this scenario, the relationship between Iran and Saudi Arabia advances steadily without major complications. Iranian assistance contributes to resolving the Yemeni conflict, allowing Riyadh to disengage while saving face. Internal political tensions in Lebanon and Iraq decrease, leading to stability. Economic cooperation between Iran and Saudi Arabia flourishes, with significant investments from Saudi Arabia, the UAE, and Qatar flowing into the Iranian economy. In return, Iran may provide Gulf monarchies with various technologies. A new security architecture is established in the Persian Gulf, resulting in the displacement of the US from the region and weakening American positions in the Middle East. The idea of a strategic partnership between Arab monarchies and Israel, as seen in the Abraham Accords, becomes obsolete.

2) Slow progress and limited breakthroughs. This scenario involves a gradual normalization process between Iran and Saudi Arabia but without significant breakthroughs. Mistrust between the two countries remains, and resolving the complex Yemen conflict proves challenging due to the conflicting interests of various actors involved. The fate of Iran’s economic relations with Gulf monarchies is influenced by the outcome of the JCPOA (Iranian nuclear deal) negotiations. If no compromise is reached, and Iran continues its uranium enrichment activities, the activation of cooperation becomes difficult, especially if international sanctions are imposed alongside American sanctions.

3) Deadlock or breakdown of agreements. Although less likely, this scenario entails a deadlock or breakdown of the achieved agreements. Factors contributing to this outcome may include the imposition of UN sanctions against Iran, the election of a new US president (such as Donald Trump) who opposes reconciliation with Iran, opposition from segments of the Shiite clergy and security apparatus in Iran, and extremely favorable offers from the US to Saudi Arabia. In this scenario, Saudi Arabia could form a partnership with Israel and create a bloc involving the UAE and India in the northern part of the Indian Ocean.

It is important to note that the future development of Iran-Saudi relations depends on various factors, including geopolitical dynamics, regional stability, internal politics of both countries and the resolution of key conflicts in the Middle East.



2. Atwan A. لينكن يتعهّد لإسرائيل بتطبيع علاقاتها مع السعوديّة.. لماذا ننصحه بالتمعّن بهذه “اللّطَمات” الأربع التي قد تؤكّد فشله المُسبَق؟// بلينكن-يتعهد-لإسرائيل-بتطبيع-علاقاته .