Democracy is arriving in the Middle East, albeit slowly. But what is making progress at a much faster pace is the cold war between Iran and Saudi Arabia. Some described the fall of the Mubarak government, preceded by the fall of the Ben Ali regime in Tunisia, as the Middle East's Berlin Wall moment. The parallels with the cold war in Europe do not end there. There are also similarities between the entry of Soviet forces into Budapest in November 1956 to put down a popular uprising and the Saudi decision to send forces into Bahrain on 14 March this year.

The Soviets were worried that communist Hungary might fall into the hands of their western cold war adversaries, and thus felt it necessary to send their forces to put down any such initiative. The new Saudi strategy is based on similar calculations. They sent their forces into Bahrain because they felt that if the Shia uprising succeeded, it could turn the country from a Saudi friend into an ally of Iran.

The Saudi decision to risk the lives of its own soldiers in Bahrain is a sign of how seriously they view the situation. It is a departure from the old strategy, where the Saudis paid others to do their fighting for them – as with the Saudi financing of Saddam Hussein's war against Iran between 1980 and 1988.

As far as the Saudis are concerned, the gloves are off and this means that the Middle East's version of the cold war is intensifying.

The Iranian government is furious as well. Publications such as the pro-Ahmadinejad Raja News have accused the Saudis of creating a "bloodbath" in Bahrain. Others, such as the Tehran-based Asr Iran, have called for the creation of a Hezbollah movement in Bahrain. Meanwhile, the Association of Independent Student Unions in Iran has declared its readiness to go to Bahrain in order to confront government and Saudi forces there.

This fury is now turning into warnings. President Ahmadinejad has already cautioned the Saudi royal family that they should "learn from Saddam's fate".

The Saudis should now start preparing themselves for Iran's response, because the Iranian government is not going to let this pass quietly.

The question is: what is Iran willing to do to confront the Saudis?

It is unlikely that Iran would send its forces across the Gulf into Bahrain. This move would be very risky, both politically and militarily.

Instead, the Iranians will most probably to continue to focus on undermining the Saudis in places such as Lebanon. In fact, Iran's own actions there also fanned the flames of the cold war, especially its support for Hezbollah, which in 2008 attacked local Sunnis, leaving 11 dead and 30 wounded. This infuriated the Saudis, who are close to Lebanon's Sunni community and have backed them. Hezbollah's show of force boosted its leverage significantly, and thus helped it acquire its much-desired veto in Lebanon's cabinet.

This helped boost Iran's position in Lebanon's political arena, much to the anger of the Saudis. What probably added to the Saudis' frustration at Iran was the assassination of the former Lebanese prime minister Rafik Hariri in 2005. Although the international tribunal has still not declared its findings, it is very possible that the Saudis have already decided that Hezbollah carried out the hit, with Iran's blessing, thus increasing their motivations for taking a tough stance in Bahrain.

Another area where Iran could undermine Saudi Arabia is Yemen. It is believed that Iran does have some influence there. If the opportunity and ability exists for Iran, its leaders are very likely to try to undermine Ali Abdullah Saleh's government as a strike against the Saudis.

The secular revolutions in Egypt and Tunisia posed a threat to the Iranian regime, because they were about democracy and were not based on religion or religious identity. Such a concern is valid, because democratic revolutions in the region could re-energise calls for democracy in Iran. To avoid this, Iran's leaders adopted a narrative whereby they told their own public that events there were part of an "Islamic awakening".

However, in Bahrain, the Iranian government got what it was after all along: an uprising based on religious identity. And what better than an uprising based on the grievances of Shia Muslims who are demanding their rights?

The entry of Saudi Sunni forces to put down the Shia was the cherry on the cake for Iran's supreme leader, Ali Khamenei. He now has the pretext and justification to use this to boost Iran's standing in the region, especially among Shia communities and groups such as Hezbollah. He can also use this new development to improve his relations and legitimacy with senior Shia clergy in Qom who are equally angry with the Saudis.

Winds of change are blowing across the Middle East. More autocratic regimes may fall and be replaced with democratic rule. What is more certain is the new era in the cold war between Iran and Saudi Arabia. Its ramifications on the political map of the region are likely to last for many years to come.