The agreement between Iran and Saudi Arabia to restore diplomatic and economic ties is the latest development in the geopolitical shifts in the Gulf region that have been taking shape since January 2021.
The Saudis have been engaged in talks with Iran from around the same time as that month’s Al Ula Summit, which ended the blockade of Qatar and mended the rift within the Gulf Cooperation Council. In the two years since, the United Arab Emirates has restored its diplomatic relations with Iran and even replaced China as Iran’s top import partner; Kuwait, too, has returned its ambassador to Tehran.
The negotiations between Iran and Saudi Arabia since 2021 largely took place in Iraq and Oman. Other regional countries, including Kuwait and Pakistan, had attempted to arrange for talks between Tehran and Riyadh on numerous occasions in the past seven years. The heightened military tensions in the region during Donald Trump’s presidency in the United States ignited a sense of responsibility by other global powers and players to help manage and resolve regional conflicts.
China has been vocally calling for reconfiguring the regional security architecture in the Persian Gulf since 2020. In a U.N. Security Council meeting arranged by Russia in October of that year, China presented its proposal for security and stability in the Gulf region, arguing that with a multilateral effort, the region can become “an Oasis of Security.”
The process of moving from the sideline to the centerstage has long been in the making. The 2019 drone strikes on Saudi Aramco facilities served as a chill warning that tensions between Tehran and Riyadh may hit at the heart of China’s vital interests. But energy security is just one part of a broader picture. Beijing’s growing political, financial, and economic exposure has reached an inflection point from which acting as a free rider does not fully guarantee the protection of its interests anymore.
China took the mantle of responsibility and the role of a direct mediator when it was clear that an agreement was possible to finalize the détente. While China’s former Foreign Minister – and current Politburo member – Wang Yi directly mediated the agreement, other players, including former Iraqi Prime Minister Mustafa Al Kadhimi, were engaged as facilitators. This distinction is important as it adds to the significance of the Chinese role. Mediating a deal between Iran and Saudi Arabia fits China’s broader strategy and interests in the Persian Gulf.
According to the Chinese understanding of the region, Iran and Saudi Arabia are “pivot countries” whose political, economic, and military power make them indispensable partners for Beijing, making balance between the two the most consequential strategy. For both countries, China is the largest trading partner. Yet, the difference in trade levels is striking. While Sino-Saudi trade amounted to $87 billion in 2021, boosted by $57 billion worth of Chinese oil imports from the Kingdom, bilateral trade between Iran and China sat slightly above $16 billion in the same year. Once among China’s top oil suppliers, Iran has been struggling to keep the trade balance in its favor. Nonetheless, Beijing has granted Tehran and Riyadh the status of comprehensive strategic partners – the highest in China’s partnership diplomacy in the Middle East.
But China’s balancing act is more articulated than just signing similar partnership agreements with both partners. While economic relations are unequivocally unbalanced in Saudi Arabia’s favor, China guarantees Iran political support and a financial lifeline in the face of U.S. pressure. Yet, offering different goods to equal partners often shakes the balancing act. In December, the joint China-GCC communiqué that followed Chinese President Xi Jinping’s trip to Saudi Arabia generated anger in Iran, exposing the limits of China’s diplomacy from the sideline.
China’s emergence as a mediator in the Saudi-Iran rivalry is hardly purely reactive. Instead, it reflects a broader re-adjustment of Beijing’s foreign policy towards a more proactive global role. In the face of increasingly harsh competition with Washington and the gordian knot of the war in Ukraine, Xi and the Chinese Communist Party leadership have conveniently jumped on a diplomatic process already close to the finish line, sealing it with the badge of a great power committed to peace. The Chinese effort is a win-win application of the recently launched Global Security Initiative – a clear sign that China intends to use this flagship diplomatic success as a launchpad to boost itself in the non-Western world.
China’s unprecedented direct involvement in such a delicate diplomatic and security dispute opens up questions about if and how Beijing will act as a guarantor of the Saudi-Iranian rapprochement. Although it is unlikely that the agreement includes specific provisions regarding Beijing’s role, Saudi commentators seem to embrace the idea that Beijing will eventually oversee Tehran’s fulfillment of obligations, given that “if Iran cheats, it will lose [China] out.”
But by agreeing to China’s involvement, both Iran and Saudi Arabia are committing to a serious process that leaves no room for gimmicks or playing hardball. There is a sort of respect in both countries’ approach toward China that is very different from attitudes toward the United States and European countries. There has never been an act of public belittlement against Beijing by the Iranian or Saudi governments. Quite the opposite, both countries have repeatedly rolled out the red carpet for Chinese officials in the past years.
The agreement includes reappointment of ambassadors within two months, following an imminent meeting between the foreign ministers of both countries. But more importantly, the preliminary and primary result of the negotiations was to return to compliance and implementation of two key agreements: the General Agreement for Cooperation in the Fields of Economy, Trade, Investment, Technology, Science, Culture, Sports, and Youth, from 1998, and the Security Cooperation Agreement from 2001, both signed under President Mohammad Khatami in Iran and King Fahd in Saudi Arabia. Numerous high-level meetings took place in the time period between the two agreements.
Not mentioned in the March 10 deal is what both sides have agreed with respect to ending the humanitarian situation and political deadlock in Yemen; Iran’s accusations against Saudi-funded Persian language media; as well as the proxy conflicts across the region, including in Lebanon and Iraq. But no one is expecting a grand bargain at this stage or anytime soon. Restoration of diplomatic ties itself is highly significant and it paves the way for direct dialogue and, eventually, cooperation.
The agreement is undoubtedly a big win for the region and beyond. Bahrain, Kuwait, Oman, Qatar, the UAE, Iraq, Algeria, Egypt, Pakistan, Sudan, Turkey, France, as well as the United Nations, the European Union, and the GCC, all welcomed the agreement. The White House, too, welcomed the rapprochement, saying that “we support any effort to de-escalate tensions there” and “we think it’s in our own interests.” But the agreement is certainly a cause for concern for some groups in the United States and Israel.
These developments in the Gulf region are counter to the recent reports of the imminent formation of an Arab-Israeli coalition against Iran. While Iranians and Saudis were secretly negotiating in Beijing, reports were circulating on the final impediments to Saudi recognition of Israel, which included a list of security guarantees from the U.S. against Iran. In a twist to those reports, the Saudis dealt with Iran directly and through diplomacy. That is not to say cooperation with Israel will not continue, nor to say that recognition is not possible in the future. But what is clear is that the regional countries do not seek a military conflict.
Regional countries are keen on opening new horizons and this agreement finally allows them to do so. Saudi Foreign Minister Prince Faisal bin Farhan stated, “The countries of the region have one destiny and common denominators that make it necessary for us to join together to build a model of prosperity and stability for our peoples to enjoy.” This agreement is certainly a boost for regional diplomacy and has opened the door for further bilateral and multilateral arrangements and agreements in the near future.
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