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Iran and Saudi Arabia's Wrestling Match

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The ongoing diplomatic confrontation between Iran and Saudi Arabia resembles a wrestling match between long-time rivals who cannot pin the other down for long enough to actually win. They are equally adept at taking jabs at each other in an effort to establish definitive political dominance in the Middle East; the jostling has now reached a critical point given the fragile regional landscape. Since the end of July the feud has grown in scope to have direct impact beyond the Middle East.

In the last week of July Saudi Arabia agreed to supply an additional 3 million barrels per day of oil to India following Iran's cessation of Indian oil exports, the result of a failure on the part of the Indians to pay Iran for oil shipped since late last year (due to international payment sanctions imposed on Tehran). India used the dispute to demonstrate to Iran that it has the ability to diversify its oil supplies as necessary, which is no doubt an underlying concern for Iran vis-à-vis the other countries to whom it sells its oil. Riyadh's action naturally resulted in an escalation of tensions between Tehran and Riyadh, yet, India clearly needed to fill the shortfall. How many oil producing countries have the ability to provide an additional 3 million barrels per day of oil on short notice -- especially given the shortfall from Libya? No other country but Saudi Arabia. Where did the Iranians expect the Indians to go to fill the gap?

Neither Iran nor Saudi Arabia is likely to confront the other militarily, but rather through the use of proxies, and by flexing their political and economic power. Saudi Arabia clearly has more financial power, and the ability to influence the region's countries as a result of its economic might. Iran, on the other hand, is forceful in its use of non-state actors throughout the region, and continues to have the ability to influence Shi'a populations throughout the Gulf, although the degree of its influence has in some respects become more limited than it once was as a result of the introduction of other state and non-state actors in the arena.

To be sure, the Sunni-Shi'a divide is an important component of the two countries' bilateral relationship. The Saudi regime is under ongoing pressure from clerics to support Sunnis in Iran. Similarly, Iran's support of the Shi'a minority in Saudi Arabia has become a growing source of concern for the Saudi government, particularly at this time. But the tussle between Iran and Saudi Arabia is also about how some grand geopolitical issues will ultimately be resolved. Can Saudi Arabia's de facto economic and political pre-eminence in the region continue, given the shifting landscape resulting from the Arab Spring? Can Iran achieve what it believes is its own manifest destiny, and reclaim is regional dominance? If it were able to do so, which countries would lose out, and which would gain? Will either country find itself swept up in its own political upheaval in the months and years to come? What impact will any of this have on U.S. influence in the region?

Saudi Arabia's influence has diminished over the past decade, the result of a combination of the rise of Turkey as a regional power, the relative decline of the power of OPEC, a rise in the economic power of non-OPEC oil producers, and the ability of China to gain a foothold in the region. The fissure that has grown between Saudi Arabia and the U.S. since the Obama Administration came to power is becoming serious. Both countries' have used the other as a natural extension of their own power in the region. The ability to do so in the future cannot be taken for granted, given waning U.S. influence, and the dislocation of the decades-old political paradigm that has been in place in Egypt and Syria. The implications are uncertain, at best.

The Iranian-Saudi wrestling match has yet to reach a crescendo, and may not for some time to come. It may take a dramatic event -- such as the use of Saudi air space by Israel to bomb Iran's nuclear facilities at some point in the future - to reach the boiling point. In the interim, each will continue to seize opportunities to take jabs at the other in the hope of spurring an Iranian or Saudi Spring in the coming months. In neither country does it appear even remotely likely that the current human rights winter will turn to spring any time soon, but only if this were to occur successfully in either country would dramatic political change stand the greatest chance of permanently altering the geopolitical landscape in the Gulf.

Daniel Wagner is CEO of Country Risk Solutions, a political risk consulting firm based in Connecticut (USA), and author of the forthcoming book Managing Country Risk, to be published by CRC Press in the first quarter of 2012. Azadeh Pourzand is a research analyst with CRS based in the Netherlands.