The story so far: Saudi Arabia and Iran, two of West Asia’s major powers that have been at odds with each other for decades, agreed to restore diplomatic relations last week in an agreement brokered by China. The rivalry between the two dates back to pre-revolution Iran when they competed with each other for regional dominance. After the 1979 revolution brought down the Iranian monarchy and turned the country into a Shia theocratic republic, sectarian and ideological flavours were added to the mix. In recent times, it had turned into a cold war with both sides supporting their proxies across West Asia. Formal ties between them collapsed in 2016 after the Saudi embassy in Tehran was overrun by protesters following Riyadh’s execution of a revered Shia cleric. Now, under China’s mediation, they have agreed to start a new beginning. If peace holds, it could have far-reaching implications for regional security, stability and geopolitics.
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What are the terms of the agreement?
Saudi Arabia and Iran started directly talking to each other in 2021 and had held multiple rounds of negotiations thereafter, first in Iraq and then Oman, without any breakthrough. There was, however, a growing realisation on both sides that the diplomatic path should be kept open. In February 2022, a senior Iranian Foreign Ministry official told The Hindu in Tehran’s National Gardens, “The Saudis now realise that they don’t have an alternative to having stable relations with us. It’s too early to say if there will be a breakthrough, but we’re talking.” When China’s President Xi Jinping visited Riyadh last December, he pushed for a rapprochement between the two. In January, Saudi Foreign Minister Prince Faisal bin Farhan said in Davos, Switzerland, that Riyadh had “reached out [to Iran] and we are trying to find a path to dialogue”, without specifying China’s role. Last week, the reconciliation was announced after days-long secret talks in Beijing.
Finer details of the agreement are yet to be unveiled. But officials on both sides say, according to reports, that Iran has agreed to prevent further attacks against Saudi Arabia, especially those from the Houthi-controlled parts of Yemen (Iran backs Houthis, a Shia militia in Yemen while the Saudis back the government forces). Saudi Arabia, on its part, agreed to rein in Iran International, a Farsi news channel that is critical of the Iranian regime (which the Iranian intelligence has termed a terrorist organisation). The Foreign Ministers of both countries would meet soon to thrash out the terms of the reconciliation before reopening embassies in each other’s capitals in two months. China is also planning to host a cross-Gulf conference of Iran and the six Gulf monarchies (Saudi Arabia, the UAE, Qatar, Bahrain, Kuwait, and Oman, who make up the Gulf Cooperation Council, or GCC) this year to further strengthen peace in the region.
Why did Saudi Arabia reach out to Iran?
West Asia has been undergoing strategic realignments in recent years. In 2020, the UAE became the first Arab country to normalise relations with Israel in a quarter century. In the following years, Israel and Arab countries deepened their partnerships. In 2021, Saudi Arabia, the UAE and their allies decided to end their failed blockade of Qatar. The U.S. was also trying to broker a normalisation agreement between Saudi Arabia and Israel. One of the key drivers of these realignments is the U.S.’s deprioritisation of West Asia. The U.S., the traditional great power in the region, has bigger foreign policy challenges in its hand now such as the Russian war in Ukraine and China’s rise in the Indo-Pacific. America’s allies in the region see the twin realities of a power vacuum created by the U.S.’s deprioritisation and the challenge posed by Iran’s rise. To address these problems, the U.S. wanted to bring the two pillars of its West Asia policy — Israel and the Arab world — together against Iran so that the American alliance system in the region would not be disrupted. While the UAE chose this path through the Abraham Accords, the Saudis decided to go slow on reconciling with Israel, especially since violence kept spreading in Israeli-occupied Palestinian territories.
Additionally, relations between Saudi Arabia and the U.S. have been rocky in recent years. The bedrock of the partnership, which goes back to the meeting between King Abdul Aziz bin Saud and President Franklin Roosevelt aboard USS Quincy in 1945 off Egyptian waters, was America’s security guarantees in return for Saudi oil. The U.S. is now one of the top oil producers in the world and is not as dependent on the Gulf Arabs as it used to be during the Cold War. This allowed American Presidents to expedite the U.S.’s deprioritisation of the region. When Saudi oil facilities were attacked in 2019 (for which Iran was widely blamed), the U.S. looked away. This seems to have prompted the Saudis to look for alternative solutions for the Iran problem. The solution they came up with was to reach out to the Iranians.
What led Iran to accept the deal?
Iran is going through one of the toughest phases of economic isolation and domestic pressure. Tehran knows that getting a reprieve from Western sanctions is not a near-term possibility and at home, despite its crackdown, protests refuse to die down. Its economy is deteriorating and its currency, the rial, is struggling. Iran wanted Chinese investments and support for the rial. According to Iranian media reports, China allowed Tehran to withdraw parts of the $20 billion funds that were frozen with Chinese banks (after the U.S. sanctions). So, while struggling with isolation and sanctions, a deal with Saudi Arabia, under China’s mediation, could open economic lifelines for Iran. And strategically, Iran knows that such a deal could complicate American effort to rally Arab countries and Israel against it. So economically and strategically, a reconciliation is beneficial for Tehran, at least in a tactical sense.
What does China gain from the deal?
Unlike the U.S., which has a history of military interventions in West Asia, China comes with a cleaner record. While the U.S.’s ties with Saudi Arabia faced headwinds in recent years and it has hostile ties with Iran, China has warm ties with both — it is a leading buyer of Saudi oil and the largest trading partner of Iran. This allowed China to use its economic leverage to bring the parties closer.
China has economic, regional and strategic interests in playing the role of a peace broker in West Asia. China is the world’s largest oil buyer and stability in the energy market is essential for its continued rise. If a detente between Saudi Arabia and Iran can offer some stability to West Asia in particular and global energy supplies in general, China stands to benefit from it. Regionally, the agreement marks China’s arrival as a major power in West Asia. If one looks at all the major peace initiatives in the region in the post-War world — be it the Camp David agreement (1978), Oslo Accords (1993), the Israel-Jordan Treaty (1994), Middle East Quartet (2002) or the Abraham Accords (2020) — the U.S. was a constant presence. But in the Saudi-Iran reconciliation, the U.S. is absent. This points to larger changes under way in the global order. Besides, China is also trying to send a clear message to countries in the Global South. While the U.S. is busy rallying the Western world to arm Ukraine to push back Russia and weaken Moscow through sanctions, China is quietly brokering peace in the Global South. But this increased role China is playing in West Asia comes with risks. It’s a region prone to conflicts. And the Saudi-Iran rivalry is multilayered — economic, geopolitical and sectarian. If the peace doesn’t hold and old rivals go back to their old ways, it would raise serious questions about both China’s leverage and its capacity for sustaining its big ticket diplomatic initiatives.
How does the U.S. look at the deal?
U.S. officials have welcomed the reconciliation. The public narrative is that peace between two of the major rival powers in West Asia would help stabilise the region and benefit the global energy market, which is good news for everyone. But from a strategic point of view, the U.S. would be facing unpleasant questions about the agreement. The Iran nuclear deal is practically dead. The U.S. wants Saudi Arabia to normalise ties with Israel and put up a joint front against Iran. And even when it is deprioritising the region, the U.S. would not like to lose its influence in West Asia. But now, when it looks at the region, it sees an ally (Saudi Arabia) drifting further away, a rival who it wanted to contain (Iran) making new friends and its global challenger (China) spreading and deepening its influence in a region which the U.S. had dominated since at least the Suez War of 1956.
