Iran and Saudi Arabia: Posturing and Reality

Jan. 4, 2016 Having failed to pacify Iraq, the United States has moved to a more complex strategy of trying to maintain a balance of power among major regional powers.

|January 4, 2016

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By George Friedman

Saudi Arabia executed a Shiite cleric. An Iranian crowd set part of the Saudi embassy on fire. Saudi Arabia then broke diplomatic relations with Iran, announcing their staff will leave Tehran within 48 hours. Given how this has escalated, we wonder if the Iranians contemplated an old trick – holding the Saudi embassy staff hostage. But perhaps not. Tehran’s next gesture might well be conciliatory.

In foreign affairs, it is important to distinguish between the gestures that are made and the underlying issues that are driving them. Clearly the Saudis wanted to challenge the Iranians by killing the cleric. Clearly Iran understood the challenge and responded in kind. There are those who would see these as events spiraling out of control. From my point of view, it is the underlying issue that is of importance. The gesture is simply an unpleasant way of trying to convince the other side that they should capitulate on the real, underlying issue.

The underlying issue between Saudi Arabia and Iran is often represented as a conflict between two Muslim sects, Shiite and Sunni. That is certainly part of the equation, but the fundamental tension goes back to the question of the name of the Gulf which separates them. Iran calls it the Persian Gulf. The Saudis call it the Arabian Gulf. That issue was quite important in the 1970s when the Sunni-Shite was dormant.

In the 1970s, the stakes were enormously high. The Shah wanted Iran to become the dominant power in the Persian Gulf. Following the 1973 Arab oil embargo, the price of oil soared and with it, the political power of oil producers. The Shah was sitting on a large pool of oil, but he understood that if he could dominate the Arabian Peninsula, he could control a major part of the world’s oil supply. This would have given him an impregnable position. His main adversary in this enterprise was Saudi Arabia. Riyadh also wanted to dominate the Arabian Peninsula, but was far less grandiose in its vision of what was possible. In spite of both being American allies, and in a way clients, Iran and the Saudis waged a proxy war against each other in Oman, and even sent their own troops to fight.

The Iranians didn’t have the power to take over the Arabian Peninsula, and by the end of the decade the Shah had fallen. But his successor, Ayatolllah Khomeini, was no less ambitious, and for him the Shiite-Sunni dichotomy mattered a great deal. Saddam Hussein’s Iraq, a secular Arab state which had empowered the country’s minority Sunni population, lay between the newly minted Islamic Republic of Iran and Saudi Arabia. What followed was a nine-year war between Iraq and Iran, one of the bloodiest wars since World War II. Though it ended with a formal cease-fire, it left Iraq with the upper hand. The Sunni-dominated Hussein regime in Iraq then invaded small, oil-rich Kuwait, believing its defeat of Iran gave them the right to claim a prize. Not knowing how far Iraq’s desire for a prize would go, the United States intervened and blocked both Iraqi and Iranian ambitions in Operation Desert Storm.

The Shah’s and Saddam’s ambitions had a common foundation. In the 1970s, the United States was seen as weakening. The U.S. was losing in Vietnam and reeling economically under the oil embargo. In the 1980s the United States was strengthening but seen as indifferent. Following the Soviet retreat from eastern Europe, Washington didn’t care who owned the oil that was shipped from the Arabian Peninsula.

It is important to remember that the Arabian Peninsula has been subordinate to great power interests and ambitions for well over a millennium. It was dominated by the Ottomans, then by the British and most recently by the United States. Dominated is perhaps the wrong word, as the relationship has always been more complex than that. Another way to think of it is as guarantor. Certainly since the decline of the British, the Americans have been the guarantor.

As we have discussed in our net assessments and forecasts, the United States has adopted a more distant attitude to the Arabian Peninsula and to the region as a whole. Having failed to pacify Iraq, the United States has moved to a more complex strategy of trying to maintain a balance of power among major regional powers: Turkey, Iran, Saudi Arabia and Israel. This has involved shifts in U.S. relations with each of these countries, and has created a deep ambiguity in the region. The Saudis and Iranians, each aware of their own vulnerabilities, will inevitably look at past behavior as a measure of future intentions.

This has been compounded by the decline of oil prices. The Iranians have realized that whether sanctions are lifted or not, their ability to solve their economic problems through oil sales has declined. The Saudis meanwhile have created a social contract whereby oil profits generate a generous safety net and thereby ensure the stability of the Saudi Kingdom. But Riyadh realizes it is likely impossible to maintain if oil prices remain at these levels or even decline.

Each side is measuring its own weakness in the context of the absence of the United States as an overarching power. Both are realizing that the question of whether the Gulf is named Persian or Arabian is on the table again. The Saudis are afraid that the Iranians will support a rising of Shiites living along the Gulf, as they did in Bahrain during the Arab Spring. If there were ever a time to try this, it is now, with oil prices declining and the U.S. shifting strategies. From the Iranian side, the perception is that the Saudis have been supporting anti-Shiite forces throughout the region and implicitly supporting IS. If Saudi Arabia were successful, it would create Iran’s nightmare, a Sunni-dominated Iraq prepared for a replay of the Iran-Iraq war.

Neither of these scenarios is preposterous. Therefore, each side is taking the measure of the other. The execution of a Shiite cleric was a warning to Shiites living in Saudi Arabia not to resist Saudi power. The fire in the embassy was a warning that not only will Iran stand against the Saudis, but should Iraq become a Sunni state, there are few limits to what Iran would do in response. They lit a fire, but a small one. The Saudis signaled back that there can be no normal relations while Iran threatens them. Iran will respond.

But it is not the responses that lead to conflict. It is the underlying reality. Without the United States guaranteeing Saudi security, Iran is the most powerful state in the Persian Gulf, and they will call it what they like. Direct war is unlikely. The geography of such a war would involve Iraq, and that has been the graveyard of ambitions of late. A rising among the Shiites is unlikely while the Saudi security services are at the highest state of alert. The Saudi ability to create mischief in Iran is limited. To the extent that this conflict will be waged, it will be in Iraq, where the Sunnis and Shiites are fighting a war already, in Syria, and in Yemen.

We should not forget another part of the strategy. The Saudis were appalled at the U.S. agreement with Iran over their nuclear program. Since then, the Iranians have fired missiles in the area where U.S. ships were maneuvering, and have drawn closer to the Russians, at the same time the Americans are in confrontation with Russia. In creating a crisis at this moment, apart from all other issues, the U.S. will tend to be protective of the Saudis and hostile to Iran. If that ruptures the treaty between the U.S. and Iran, the Saudis would not be upset at all.

This conflict is limited but it is a lesson that balance of power tactics requires an enormously subtle hand. It also creates dangers, just as direct intervention does. The American strategic shift is a major part of the current exchange between Iran and Saudi Arabia. No one can rebalance it but the United States, and it may decide that low-grade conflict and gestures is a small price to pay for staying out of it.