By Manal Saadi

There is no need to argue that Saudi Arabia and Iran — as the two biggest regional powers in the Gulf and the rising tension between the two countries who are engaged in proxy wars in Syria, Yemen, Iraq and somehow Bahrain — have installed a climate of Cold War II.

But how did we get here?

Saudi Arabia has existed since 1932 as a Sunni country and the birthplace of Islam. Its history of creation is unique, mesmerizing and fascinating. For its part, Iran, has a glorious past, with various empires that conquered the Arab-Islamic world at certain periods of time.

While the Shah was in power, Iran’s relations with the Arab Gulf States were normalized, and indeed Iran’s navy was used to act as the policeman of the Gulf. The situation changed, however, when the Iranian Islamic revolution occurred in 1979, with consequences for both countries and their relations. Iran’s Ayatollah wanted to export their respective model and undermine Saudi Arabia, which Iranian officials have seen as corrupt and unworthy due to its relationship with the United States and the West. The Shia country, subsequently, has supported Shia communities in the Gulf that are seen as a direct threat to Saudi Arabia.

Not only do the leaders of the Iranian revolution see Saudi Arabia as a corrupt country, but they also see that country’s leaders as treacherous and disloyal. The reason behind this more than a Shia-Sunni rivalry, and as such it is important to contextualize the state of the region before the Islamic revolution — an oil embargo was occurring in the world where Iran’s leaders wanted to stop selling oil to Western powers. Iran called upon Saudi Arabia to do the same in retaliation toward those countries who were seen as helping Israel in the “Yom Kippur War”, but Saudi Arabia instead refused to stop selling its oil, and decided to increase the price of oil to destabilize the economy of the Western countries that helped Israel, without disturbing their strategic alliance with the United States.

As a result, even today, the relationship between the two countries is still feeling the repercussions of that decision.

The succession of events since 2011, where Iran sought to seize the opportunity of a possible vacuum of power during the Arab Spring, by supporting the Shia protests that erupted in Bahrain and the idea of a Shia Islamic Republic, instead proved the ability of Saudi Arabia and the GCC to sends troops into Bahrain to quash the protests. Was it a symbolic gesture, or a warning for Tehran?

Upon this backdrop there are the situations in Yemen, Iraq and Syria, where today Saudi Arabia and Iran are engaged in a proxy war. The Iranian Nuclear deal with the P5+1, the uncontrolled situation in Yemen, the Hajj crush where Iran claimed more than 400 dead citizens, the execution of 27 Sunnis by the Iranians, the execution of Nimr al Nimr (a Shia Sheikh) by the Saudis, the attack of the Saudi Embassy in Tehran, then the cutting of the diplomatic ties between the two countries, have all served to intensify the rivalry between the two countries.

What Is To Expect In The Future? Three Games, Three Scenarios

Accommodation game:

In this scenario, Saudi Arabia and Iran will have to sit at the table of negotiation and find a compromise. But how can two rival countries negotiate common interests if there is the perception of any mutual threat?

Iran and Saudi Arabia are both rich countries, with large accesses to natural resources, big territories and economic models that are based on oil. If there is no common interest between the two powerful states in the region, the creation of ISIS then constitutes a threat to both governments. Iran doesn’t want a powerful Sunni group in Iraq and Syria and ISIS is threatening the Gulf monarchy. However, Tehran and Riyadh seems to have no intention to lower the temperature and talk again for a potential solution toward the defeat of “Daesh”, and the rivalry between them is distracting attention from the war against ISIS. If a mutual threat is not enough to push for negotiations what can be the other solution?

As a consequence of the Iranian deal, the Saudis seem to be fed up with the shock therapy that the United States is exerting in the region at a point that they refused a seat in the Security Council. Saudi Arabia is today looking for a new partnership with different countries, the latest highest meeting of the GCC has proved the lack of confidence of the Saudis regarding their alliance with the United States. With the intensification of tensions between Riyadh and Tehran, the Americans show no will to interfere and defend the interest of their historical ally, and Saudi Arabia is frustrated by the Washington-Tehran reconciliation.

Recently Saudi Arabia’s King Salman met the Chinese President in Riyadh where they signed a memorandum of understanding on the construction of a high-temperature gas-cooled reactor that can help the growing energy demand for electricity and water desalination in the Monarchy. This will also lead to the beginning of a nuclear program in Saudi Arabia. Actually, since 2006, the monarchy was projecting to construct and promote a peaceful nuclear capacity program within the GCC, and in 2007 the six Gulf States studied with the IAEA (International Atomic Energy Agency) the feasibility for a regional nuclear power, with the assistance of France. Saudi Arabia has already signed many international agreements for a nuclear cooperation with different countries as France, Argentina, South Korea, China.

Recently, in June 2015, Russia and Saudi Arabia signed an agreement for cooperation in the field of nuclear energy including the design, construction, operation of nuclear power, education and training and other aspects related nuclear reactors. Now, what if the Saudi’s decide to weaponize the use of nuclear energy? Such a decision would have subsequent effects in the region and lead to an arms escalation of WMD.

Nevertheless, if this situation is contained, it could bring back stability in the region as proven by history.

During the Cold War, the Soviet Union and the United States expanded their arsenals of ballistic missiles, the Cuban missile crises and the threat of a nuclear war between the two blocs that could destroy Russia and the United States and maybe the world, generated the need for negotiations to find a compromise. Khrushchev was going to dismantle the offensive weapons in Cuba and in exchange the US made a public declaration that it would never invade Cuba without a direct provocation, but it also said it would dismantle its missiles from Turkey and Italy. The outcome of the negotiations between the two blocs resulted in the establishment of a hotline between the Kremlin and Pentagon and the beginning of the “detente” period.

The struggle for power in the region between Saudi Arabia and Iran is already leading to an arms escalation, and it could already be possible for both countries to start a weaponization of nuclear facilities, and as such it wouldn’t matter who would start first, as long as the other would follow. Pakistan never wanted a nuclear bomb until India got one. Achieving parity with a rival country would lead the country’s to sit at the negotiating table and the achievement of a compromise. Iran could promise not to get involved in Yemen and in Bahrain, while Saudi Arabia would pull-out its intervention in the Syrian conflict, and Iran would join the war against ISIS.

Destruction game:

The year 1979 was marked ny the Islamic revolution in Iran, and the Iranian theoretical or “spiritual” leader aimed at exporting the Shia-Islam brand to Shiites minorities within the Middle East — this constituted a threat for the powerful Sunni-Monarchy, as it could undermine the existing equilibrium in the region. The Iranian clerics were urging the Shiites communities of the Gulf States to rebel against their rulers, and demonstrations started in Saudi Arabia, Kuwait, Bahrain and Iraq.

A year later, Iraq attacked Iran, and the two countries engaged in a war that served the interests of Iraq, and the Gulf countries, more precisely Saudi Arabia. Despite the support by Western countries, this war undermined the West’s interests in terms of oil flows disruption. Saudi Arabia with Kuwait were financing Iraq, and the United States was indirectly supporting the Iraqi government by cutting off Iran’s supplies. The Iranian revolution, followed by the war installed a climate of increasing rivalry between the powerful Shia and Sunni countries. With the recent uprising of the Arab Spring, the situation intensified.

Since the conflict in Syria and Yemen seems to offer no political solution, a climate of Cold War was installed in the region between Saudi Arabia and Iran.

The 3rd round of the Geneva peace talks regarding Syria, included the participation of delegates from the Saudi-backed opposition, the delegates from the Syrian government, the High Negotiations Committee and other opposition figures to discuss a possible ceasefire, prisoner exchanges, humanitarian aid deliveries and the threat posed by ISIS. The problem is that neither the opposition nor the actual Bashar government wants to negotiate with each other, and neither Saudi Arabia or Iran are willing to bury the hatchet in Syria.

With the Iranian nuclear deal, the reconciliation between Iran and the West and the failure of finding a solution in Syria and Yemen, the tensions between the two powerful nations in the regions are reaching their peak. One should not forget that the assassination of Archduke Ferdinand was sufficient to cause the World War I, and today a small incident in the region could have large consequences. Relations between both nations are exacerbated and as such we can imagine that a small event going wrong in Syria or Yemen could lead to a direct war between Iran and Saudi Arabia.

A war in the region could erupt at any moment, it is certainly the least preferable scenario, but the most likely to happen if the tensions between the two regional powers are not softened. A direct conflict between the two influential States would undermine the West’s interests, oil prices, and the economy of the world and would shift a regional war toward a Third Word War.

On one side, the United States with the European powers would back Saudi Arabia and the other Arab Gulf States, on the other side Russia would back Iran and Syria militarily and financially. Who would be the winner? We can’t tell, but a War is very expensive for both countries and for their allies, especially for Russia that is now suffering economically from its intervention in Syria. What is certain is that a Third World War would leave the economy, culture and politics of Iran and Saudi Arabia completely destroyed, and would change the actual “World Order”.

Conversion:

Since the Arab Spring, Iran has started increasing its military presence in the Middle East. In Iraq, it has sent its soldiers to fight alongside the Iraqi Army, in Syria the Iranians are financially supporting the Assad’s government, and Hezbollah in Lebanon and the Houthis in Yemen are backed by Iran. Can Iran’s rising power destabilize the region stability and create a conversion of power?

As my professor Anis Bajrektarevic well summarized on the Gulf and its surrounding intellectual scenery: “as it solely bridges the two key Euro-Asian energy plateaus: the Gulf and Caspian. This gives Iran an absolutely pivotal geopolitical and geo-economic posture over the larger region – an opportunity but also an exposure! …Nearly all US governments since the unexpected 1979 Shah’s fall, … have formally advocated a regime change in Teheran. On the international oil market, Iran has no room for maneuver, neither on price nor on quotas. Within OPEC, Iran is frequently silenced by a cordial Saudi-led, GCC voting”. Therefore, only now, the United Nations sanctions against Iran are formally lifted, which reconnected Iran to the global economy. The European embargo on Iranian oil is to come to an end and the Iranian banks will re-establish connections with the European banking system and private companies would be able to operate with no fear of a western sanction.

Currently, Iran is representing a diverse emerging market in the fields of manufacturing, retail and energy.

The public sphere has demonized Iran for decades, but with the Rohani government Iran is converting into an attractive country for investors. Jawed Zarif, Iran’s foreign minister, gives the image of an open country for negotiations, that is looking for long term solution and for stability in the region and in the world, but also a country that is trying to improve the economic and political situation of its young citizens.

Meanwhile, Saudi Arabia is suffering from a huge deficit in its public financing for the first time. With the crash of the crude oil prices, the deficit in resource-rich Saudi Arabia is more than 20% of the GDP, which according to Saudi Arabia’s finance minister is around $120bn. To balance the budget, the kingdom needs an oil price of $100 a barrel, however, its decision to keep oil production high has caused a plunge in the oil prices.

Additionally, the decision of OPEC — with the influence of Saudi Arabia — to keep oil production high is going to burden the US shale oil market and put the US gas industry under pressure, which could undermine the relationship between the two allies in the region.

The emergence of a prosperous Iran at the international level could serve as a pattern in the region, and shift the attention from the Saudi petrodollar monarchy to the other “attractive” country in the region. As such, while today Iran is improving its image in the sphere of public opinion, changing from the “devil” to “the sexy lady”, Saudi Arabia’s model of “Wahhabism” is more and more connected to Islamic extremism and blamed for causing terrorism.

Iran can use its new charisma, plus its energy resources, to attract the West, improve the situation in the country, as well as offer stability in Iraq and Syria and fill all the gaps where Saudi Arabia has failed.

The two regional powers are playing a poker game… will the winner take all?

*Manal Saadi, of Saudi-Moroccan origins, is a postgraduate researcher in International Relations and Diplomacy at the Geneva-based UMEF University. She was attached to the Permanent Mission of Morocco to the UNoG and other Geneva-based IOs, as well as to the Permanent Mission of the GCC to the UN in Geneva.