Iran's Proxy War with Saudi Arabia Intensifies

The Islamic Republic of Iran and the Kingdom of Saudi Arabia have never been very friendly to each other, but since 2013 their relations have markedly worsened … not only as a result of the Syrian conflict.

From the last few months of 2016 the tension between the two has become even stronger, because of the Iran-supported Assad regime in Syria clearly gaining the upper hand in the conflict. The international quasi-coalition supporting the opposition to Assad, has since been fragmenting. One side, led by Turkey, is looking to explore the possibility of a political settlement, and another, led by Saudi Arabia is opposing this option. But Saudi Arabia and Iran also confront each other in other proxy wars, in Yemen, Iraq and Afghanistan. 

Only in Afghanistan have the Saudis been scoring points recently, strengthening their influence over insurgent organisations there. In Yemen, the conflict has been going badly for the Saudis, with the Houthi rebels, supplied by Iran, retaliating against heavy Saudi air strikes with rocket shelling of Saudi Arabia’s border areas. The inability of the wealthy Saudi monarchy to protect its border areas is potentially a serious source of delegitimisation for the monarchy, the fount of all power in the Kingdom. In Iraq, the regime there, which has close relations with Iran, is about to bring its northern territories back under its control, which implies renewed friction with the ‘Iraqi’ Kurds.

The Americans step in
Until the beginning of 2017 and the advent of Trump, the US government were not meddling with the Saudi-Iranian conflict. Relations with Iran improved during the Obama administration and culminated in the nuclear agreement and in the suspension of oil sanctions against Iran. By contrast, relations with traditional ally Saudi Arabia were at an all-time low, due to persistent allegations of Saudi support for various Islamist insurgencies and to the blatant disrespect for human rights shown by the kingdom. 

Saudi Arabia was not unaware that they had become regarded as perhaps an embarrassing ally, for the Americans. The Saudis were for some months uncertain about how the new Trump administration would behave towards them; they feared the worst, given the heavy anti-Saudi rhetoric of Trump’s electoral campaign.

So President Trump’s trip to Saudi Arabia and his high profile reconciliation with the Saudis (lubricated by an enormous arms deal for the US), surely came as the very welcome reassurance of a revived relationship for the Saudis. Encouraged by Trump’s seemingly wholehearted support, the Saudis quickly decided to re-launch their drive for regional hegemony. 

In the weeks preceding Trump’s visit, the Saudis had worked on reconciliation with the Egyptian regime of Al-Sisi and rejuvenated their relationship with the UAE. Yet negotiations were not so successful with some other Gulf countries, particularly with Qatar. The reason appears to have been that a condition the Egyptians and the Emirates imposed for accepting Saudi regional leadership, was a synchronised crackdown on the activities of the Muslim Brotherhood, throughout the Middle East. Contrary to the leaderships of those two countries, the Saudis have had in the past a more pragmatic approach towards the Brothers. The Qataris could not accept this shift, since they are the main financial sponsors of Muslim Brother organisations around the Middle East. To a large extent, they define their diplomatic independence through this relationship.

The result of the Saudi-led crackdown on Qatar in June, is that the anti-Iran coalition built around support for the anti-Assad opposition in Syria, has collapsed. The Turkish government had already been diverging for some months, but now Qatar has aligned with Turkey and has been dramatically improving relations with Iran, from April onwards. The Qataris have stopped supporting the opposition to the Islamic Republic of Iran (Islamic State and Baluchi groups), and reportedly even started sharing intelligence information with the Iranians. It looks as though for now, that Iran has actually been the beneficiary of attempts to form an international coalition against them, inspired by and under Saudi leadership. The Saudis are not new to massive blunders, but one wonders in the circumstances, whether the sudden and harsh turn against Qatar, was influenced by assurances of a strong US commitment to a determined and long-term campaign against Iran? It is surely complicated by the fact that Qatar hosts the US’s main military base in the middle-east.

The rhetoric against Iran has of course been high since Trump’s electoral campaign, for what that is worth. In reality for now, Trump has not repealed the nuclear agreement with Iran, but new sanctions are being considered (allegedly for the development of ballistic missiles by Iran), that might really be aimed to getting the Iranians to opt out of it, in retaliation. That the intention might be, to provoke the Iranians to escalate existing tensions into open conflict, is confirmed by Trump’s reaction to the recent Islamic State attack against the Iranian parliament, which he refused to condemn. In Eastern Syria, tension between the US on one side and Iran and Russia on the other, is at an all-time high, after a series of quite serious incidents. The Saudis recently attacked an Iranian boat that entered their territorial waters, claiming it to be a Revolutionary Guard covert operations vessel. Neither the Saudis nor the Iranians can be trusted to tell us the truth about what really happened there, but the episode seems to fit in well with a trend of increasing pressure on Iran.

How is Iran going to deal with this?
For now the Iranian reaction has been muted. They clearly understand that there are attempts going on to provoke them into a violent reaction, which then in turn would work as an excuse for more sanctions, or worse. Despite accusations of supporting terrorism, the Iranian Revolutionary Guards have not been very active on this front for many years. Their clients in Lebanon, Yemen and Afghanistan, rely on terrorist tactics only very occasionally. But the Revolutionary Guards have built up capabilities for covert operations on rather a massive scale, over the years. In Yemen these capabilities are currently being deployed, but in Lebanon they are idle right now, as they are in several other locations. 

Even in Afghanistan the Iranians have mobilised only a fraction of their potential. Hence the Iranians have the possibility of retaliating against the Saudis and the Americans, without showing their hand, or at least retaining plausible deniability. But they are not going to do it now. Iran’s allies among the Afghan Taliban, for example, are still being advised to focus on the Islamic State installations in Afghanistan, and not to fight against the Afghan government forces (supported by the US). 

Iran is ‘not evil enough’, for now
Even President Trump probably realises that Iran’s image, after the nuclear deal and the re-election of Rouhani, is not quite that of a new member of ‘the axis of evil’. The prospect of a bombing campaign against Iran’s infrastructure might feature somewhere in the administration’s plans, but would be a hard sell now. More realistically, Washington will rely on a new wave of sanctions to generate discontent, probably eventually hoping to push Iran’s hardliners to take over from Rouhani and crack down on internal dissent, perhaps even force it to ‘Pearl Harbour’ the Saudis, or even the Americans and provide a more acceptable rationale for US intervention. There is however likely to be strong opposition in Europe to new sanctions against Iran. So the Iranians are likely to try to buy time, delay sanctions, perhaps hoping that Trump gets impeached, or that the mid-term congressional elections turn him into ‘a lame duck’. For the Iranians, the economy is their most vulnerable point, because although finally it is showing recovery, the oil industry is more in need of investment and new technologies than ever. 

It’s the economy…
Iran’s oil exports are back at 2.5 million bpd, and oil minister Zanganeh has been very active in laying the groundwork for attracting foreign investment. The new ‘oil investor contracts’ have not come online yet, as investors wanted to see whether Rouhani was confirmed or not. Now however there is the issue of whether or not Trump will tear apart the nuclear agreement. It is therefore unlikely that much is going to get going in terms of investment in the oil sector for some time, although the Iranian government says that it expects a deal with ‘Total’ on the development of the south Pars gas fields ‘within weeks’. 

In 2016/17 the Iranian GDP grew 12.5% according to official figures because of oil production returning to near normal rates, after the sanctions were lifted. This of course is not sustainable and in the current year GDP growth is expected to be around 4-5%. Growth in the non-oil sectors was in 2016/17, a modest 3.3%, and massive investment and injection of new technologies will be needed to re-launch the non-oil economy as well.

The burden of the Syrian war, plus all the other commitments the Iranians have taken on, is beginning to be felt as a burden; there are for the first time public complaints about the intervention in Syria, where apart from deploying thousands of Revolutionary Guards, volunteers and army personnel, Iran is also supporting the Assad regime financially. While militarily, the turning point seems to have been passed, the Assad regime will need injections of cash for quite some more time, particularly if no international reconstruction effort will be launched. The Russians share a substantial part of the burden, but will not increase their commitment, as financially they are in an even worse place than the Iranians.