In March 2022, Saudi Arabia and Iran announced a shocking diplomatic agreement. Even more surprising was the revelation of Chinese brokering. Reflective of a quickly transforming Middle Eastern theatre, the agreement is indicative of several regional and international shifts. Whilst not a complete revision of the region’s fundamental power balance or imbalance, the announcement highlighted the increasingly multipolar outlook of Gulf leaders and a general trend to declining US regional influence. Despite not ensuring anything close to lasting peace between the two rivals, any cooling of relations will change the playing field dramatically.
BY Joel Moffat
Saudi-Iran Relations: An Overview
Despite often being portrayed as an age-old and perhaps perpetual conflict, Iran-Saudi relations have only really deteriorated in the aftermath of the 1979 Islamic Revolution. This period has seen both powers attempt to portray themselves as the international custodians of their respective branches of Islam (Sunni and Shia). Tense relations are also premised on their differing relationship with the West, and the US specifically. Saudi Arabia is a key US security and energy partner, whereas Iran remains stuck in pariah status.
Adverse relations reached an epoch in 2016 following the Saudi execution of Nimr al-Nimr, a leading Shiite cleric. Oman and Iraq have both attempted to broker peace deals between the conflicting actors in the years following, but such attempts ultimately achieved little [1]. It is in this context that the surprising Chinese deal is of such gravity considering its rather expansive demands, inclusive of a security cooperation pact, the re-opening of embassies in respective countries and the resumption of trade and investment accords [2]. The time frame laid down for this specifies a two month deadline.
Perhaps the most notable inclusion in the deal is the assurance of Iran to stop funding or supporting anti-Saudi proxies [3]. This refers to Houthi rebels in Yemen, Hezbollah in Lebanon, and Shia paramilitaries in Iraq. The de-escalation of these immobile conflict zones will provide significant benefits for regional security. Indeed Saudi has been looking for a way out of the perpetual Yemen conflict for several years without exposing itself to a dangerous vacuum of influence [4]. The deal provides the leverage to achieve this. Still, referring to the agreement as a ‘peace deal’ is presumptive. Even in the absence of any changes to the fundamental dynamics of the Saudi-Iran relationship, the cooling of relations will have long-lasting benefits, both regionally and internationally.
From the Saudi perspective, the agreement follows the period of de-escalation characterising the preceding couple of years. This has included the repairing of Qatari relations, easing tensions with Ankara, and attempted peace talks in Yemen [5]. The deal offers Riyadh a pragmatic way to ensure the limiting influence of an ever-expanding Iranian-backed proxy network. The growing range of these actors has cultivated the belief that US security guarantees are insufficient.
Arguably the deal is an existential necessity for Tehran [6]. A combination of support for the Russian invasion, domestic human rights abuses, and its controversial nuclear programme have devastated the Iranian Riyal. An aggressive sanctioning campaign by the US has driven the country into a tight corner. At the same time, China is a large market for Iranian energy. The expansion of relations with the East is a potential path out of this trap, indicated by Iran’s plan to soon join the Shanghai Cooperation Organisation [7].
US and Chinese Position
The Chinese-brokered deal has further cemented the view that the Middle East is experiencing a shifting regional polarity to the East. The agreement followed Crown Prince Mohammed bin Salman’s deal with Russian President Vladimir Putin to cut oil production through the Organization of the Petroleum Exporting Countries (OPEC). This occurred only a few weeks before the US’s 2022 midterm elections. Such timing has been seen by some analysts to be of specifically anti-American action [8].
Despite triggering fear, and perhaps embarrassment, in the West, it is important to note that such a deal could never be achieved by the US. Washington maintains stone-cold relations with Tehran and comparatively strong links to Riyadh. These preceding biases would not produce a balanced deal, the outcomes of which would probably be rejected outright by Tehran. As Washington increasingly takes sides in the region, its ability to operate as an effective peacemaker is undermined significantly.
Furthermore, regional players are preferable to the Chinese policy of non-interference [9]. Beijing has avoided criticism of domestic human rights abuses across the Gulf and does not carry the baggage of military engagement in Iraq and Afghanistan that haunt US-Middle Eastern relations. It should not be forgotten that the deal also principally seeks to secure Chinese interests. The Gulf provides 40% of China’s energy demands [10]. The Saudi-Iran relationship has been source of great regional instability. The funding and support for differing groups have elongated and deepened conflict in Syria, Yemen, and Lebanon. Any de-escalation of tensions will provide greater domestic energy security for China.
The long-term impact on the US position is still to be seen. It remains a preeminent international power of the Middle East, being by far the largest security partner. However, the complex interlinking between these countries will be changed by the emerging Chinese influence. This is largely due to the position of Israel, which is threatened by the re-entry of Iranian influence into the Gulf’s political sphere. It is yet uncertain how this newly brokered agreement will influence the warming of relations between Riyadh and Tel Aviv. Certainly, the de-escalation of Iranian proxies is in the security interests of Israel, especially regarding any reduction to support for Hezbollah. However, it is difficult to see any warming of relations between Iran and Israel, forcing Saudi Arabia to adopt a potentially risky bipolar balance of relations between the two countries.
Evolving Economics
The deal is also contextualised by a broader, and arguably much more substantial, shift in the fundamental workings of the global financial system. This shift is principally concerned with the oil economy. China has increasingly pushed for the advent of a “petroyuan” to rival the preeminent “petrodollar” [11]. Securing and expanding the place of the Yuan within the global financial system will have enormous ramifications for the role of China within the global political system. Any damage to the dollar’s position as the primary currency of global trade undermines the threat of US sanctioning regimes against its adversaries. The expansion of the “petroyuan” further enlarges the potential hand of China in the region. Greater linkage is also evident from Saudi investments in China. Most notably, this included a multi-billion-dollar investment from Saudi Aramco into two refineries in North-Eastern China [12].
The Gulf’s current economic prosperity is dependent on consistent oil exports, the vast majority of which are sold in US dollars. Therefore, the US influence in the Gulf cannot be underestimated. Iran’s poor relationship with the US has seen its economic prosperity decline dramatically. Any chance of the dollar loosening its regional hold has direct and potentially profound impacts on the political shape of the region. This shift was made clear in March 2022, which saw direct talks between Xi Jinping and Mohammad bin Salman to carry out a certain number of oil sales to China in Yuan [13]. On a subsequent trip to Riyadh, Xi stated his intentions to expand imports of liquefied natural gas and strengthen cooperation in engineering services, transportation, and refining. Considering the heavy dependence of China on oil imports, moving away from “petrodollar” domination is a strategic priority.
Conclusion
The Saudi-Iran deal may prove to be a solid diplomatic basis from which to pursue de-escalation between two great rivals. The brokering of the agreement by China is indicative of the shifting political allegiances and priorities in the region. This is further indicated by the Chinese promotion of the “petroyuan” as a competitor currency. While the US’ position in the region remains preeminent, it is worth considering these recent events as hard proof of the changing face of the Middle East. The future appears more multipolar in its outlook, and less constrained by the traumas and grudges of history.
References
[1] – “4 Takeaways From The China-Brokered Saudi-Iran Deal”, Foreign Policy, 14 March 2023 (Accessed 19 April 2023) https://foreignpolicy.com/2023/03/14/china-brokered-saudi-iran-deal-explained-diplomacy-biden/
[2] - “What to Know About the Iran-Saudi Deal”, The New York Times, 10 March 2023 (Accessed 19 April 2023) https://www.nytimes.com/2023/03/10/world/middleeast/saudi-arabia-iran-deal-explained.html
[3] – “4 Takeaways From The China-Brokered Saudi-Iran Deal”, Foreign Policy, 14 March 2023 (Accessed 19 April 2023) https://foreignpolicy.com/2023/03/14/china-brokered-saudi-iran-deal-explained-diplomacy-biden/
[4] – “What to expect after Iran, Saudi Arabia agree to restore ties”, Al Jazeera, 11 March 2023 (Accessed 19 April 2023) https://www.aljazeera.com/news/2023/3/11/what-to-expect-after-iran-saudi-arabia-agree-to-restore-ties
[5] - “What to Know About the Iran-Saudi Deal”, The New York Times, 10 March 2023 (Accessed 19 April 2023) https://www.nytimes.com/2023/03/10/world/middleeast/saudi-arabia-iran-deal-explained.html
[6] – “What You Need To Know About China’s Saudi-Iran Deal”, United States Institute of Peace, 16 March 2023 (Accessed 19 April 2023) https://www.usip.org/publications/2023/03/what-you-need-know-about-chinas-saudi-iran-deal
[7] - “4 Takeaways From The China-Brokered Saudi-Iran Deal”, Foreign Policy, 14 March 2023 (Accessed 19 April 2023) https://foreignpolicy.com/2023/03/14/china-brokered-saudi-iran-deal-explained-diplomacy-biden/
[8] – “4 Takeaways From The China-Brokered Saudi-Iran Deal”, Foreign Policy, 14 March 2023 (Accessed 19 April 2023) https://foreignpolicy.com/2023/03/14/china-brokered-saudi-iran-deal-explained-diplomacy-biden/
[9] – “4 Takeaways From The China-Brokered Saudi-Iran Deal”, Foreign Policy, 14 March 2023 (Accessed 19 April 2023) https://foreignpolicy.com/2023/03/14/china-brokered-saudi-iran-deal-explained-diplomacy-biden/
[10] – “‘Changing Global Order’: China’s hand in the Iran-Saudi deal”, Al Jazeera, 11 March 2023 (Accessed 19 April 2023) https://www.aljazeera.com/news/2023/3/11/changing-global-order-china-restores-ties-with-iran-and-saudi
[11] - “Petrodollar vs. Petroyuan: Can China overthrow US in the global oil market”, Firstpost, 24 March 2023 (Accessed 19 April 2023) https://www.firstpost.com/explainers/petrodollar-vs-petroyuan-can-china-overthrow-us-in-the-global-oil-market-12346142.html
[12] – “Saudi Aramco boosts China investment with two refinery deals”, Reuters, 27 March 2023 (Accessed 19 April 2023) https://www.reuters.com/business/energy/saudi-aramco-open-new-china-refinery-petchem-complex-2026-2023-03-26/
[13] - “Petrodollar vs. Petroyuan: Can China overthrow US in the global oil market”, Firstpost, 24 March 2023 (Accessed 19 April 2023) https://www.firstpost.com/explainers/petrodollar-vs-petroyuan-can-china-overthrow-us-in-the-global-oil-market-12346142.html
