OPEC appears to be stuck in a vicious cycle of cutting production only to see its share of the market filled by the United States and other, higher-cost producers that are not bound by the production restraints of the OPEC+ agreement.
The strategic impact in the Gulf region of the nuclear agreement with Iran will hinge on the perceptions of Gulf Cooperation Council (GCC) countries as to whether or not it helps to curb Iranian “adventurism” and, especially, its support for destabilizing activities in the region. The potential emergence of Iran as a more responsible regional actor holds out the possibility for a major improvement in relations, and even for crafting political solutions to destabilizing Middle East conflicts. There is also the prospect of an expansion in trade between Iran and Arab Gulf countries, especially the United Arab Emirates and Oman. But many GCC countries remain concerned that Iran could emerge from the accord enriched and emboldened, with no change in what they strongly perceive to be aggressively hegemonic regional ambitions. These concerns and prospects indicate the pitfalls and opportunities for maximizing the benefits and minimizing the costs of the nuclear agreement in the Gulf region.
It is often claimed that the Arab Gulf countries are simply, unanimously, and categorically opposed to the agreement. For example, The Times of Israel quotes a senior Israeli official saying, “There is a lot of opposition to it, especially from countries in the region. Iran’s neighbors – those who know Iran best – are united in opposition to the deal.” Such claims are not an accurate reflection of the range of responses. While many GCC countries, including the largest and most influential, Saudi Arabia, are highly skeptical about the agreement and concerned about its impact, the Gulf reactions are varied and complex.
The GCC countries are six distinct sovereign and independent entities that come together to seek common approaches to securing their basic interests. Although they agree on much, they nonetheless do not have a single, unified foreign policy, especially on granular regional issues such as relations with Iran. Each GCC country has a specific and unique relationship with Iran that informs its strategic thinking. While all six GCC members view Iran as a potential threat to their security, they have employed a wide variety of approaches in their policies toward Iran since the 1979 revolution to deal with this challenge. Therefore it is not at all surprising that the Gulf countries have expressed a range of reactions to the deal.
Oman, not surprisingly, most warmly welcomed the agreement, calling it a “historic win-win.” For a variety of reasons, Oman has developed and maintained the warmest relations with Iran of any of the GCC countries. Indeed, its good offices played a crucial role in the Tehran-Washington back channel diplomacy that led to the Iran-P5+1 nuclear negotiations, some of which were hosted in the Omani capital, Muscat. Qatar – which jointly manages an oil field with Iran – also has a history of warmer relations with Iran than many of its fellow GCC members, and Doha quickly welcomed the nuclear agreement. Kuwait, too, publicly expressed congratulations to Iran on the agreement, and said it hopes the accord will “strengthen the security and stability of the area.”
Saudi Arabia expressed its views through comments by Foreign Minister Adel al-Jubeir. After meeting with U.S. Secretary of State John Kerry on July 16, Jubeir said “All of us in the region want to see a peaceful resolution to Iran’s nuclear program,” but that “If Iran should try to cause mischief in the region we’re committed to confront it resolutely.” He emphasized the need for a “robust and continuous inspections regime to make sure Iran does not violate the terms of the agreement,” and a quick snapback of sanctions in the event of Iranian non-compliance. Jubeir insisted that Iran should use the anticipated flood of income arising from sanctions relief in a constructive manner, saying “We hope that the Iranians will use this deal in order to improve the economic situation in Iran and to improve the lot of the Iranian people, and not use it for adventures in the region.”
This skepticism comes despite considerable U.S. reassurance offered at the May U.S.-GCC Camp David Summit, and a phone call July 14 in which President Barack Obama briefed King Salman on the U.S. understanding regarding the agreement with Iran. Jubeir’s pointed warning about the use of sanctions relief for “adventures in the region” is a reference to Iranian support for clients and proxies in conflicts such as Syria, Iraq, and Yemen. If the agreement results in more responsible behavior by Iran, particularly with regard to regional conflicts, then it will be seen as a positive development by Gulf countries, which are generally more alarmed by Iran’s interest in expanding its influence in the region than its nuclear program. Consequently, if Iran’s behavior doesn’t change, or even becomes more aggressive, the nuclear agreement is more likely to be viewed as a negative development. The first and most important test of this question will arise as sanctions relief provides an influx of income to Tehran’s coffers. What the regime does with that windfall will be scrutinized very carefully by its neighbors, and will shape their perception of the regional strategic implications of the agreement.
As Abu Dhabi-based English-language daily The National phrased it in an unsigned editorial, “What Iran does with the money will determine how the Gulf views the deal. If they use it to build infrastructure, to invest in the talents of their people, and build a genuine, positive relationship with their neighbors, then there will be celebrations on this side of the Gulf as well. If, on the other hand, they continue their meddling, continue to foment unrest in Yemen and Iraq, and continue their support for the regime of Bashar Al Assad in Syria, then all the fears of the Gulf will have been realized. It will be the old Iran, merely with new window dressing.”
In the Middle East, the Syrian dictatorship of Bashar al-Assad, which celebrated the agreement as a “great victory,” is seen as potentially one of the biggest regional winners from the nuclear deal. Iran has invested a huge amount of money and resources in propping up the Syrian regime, including focusing the efforts of its Lebanese proxy, Hezbollah, to saving the regime in Damascus. Indeed, Assad seemed to be anticipating even more Iranian support in the context of the agreement, saying “We are reassured that the Iranian Islamic Republic will continue and with greater momentum supporting the just causes of the peoples and working to bring about peace and stability in the region and the world.” Saudi Arabia and several of the other GCC countries are among the strongest regional opponents of Assad. The prospect of even more Iranian support for the Assad regime was one of the issues addressed by Saudi journalist Jamal Khashoggi, who complained that “The agreement restored respect to this regime that should not have been respected and should have been punished not just for its nuclear program but also for its aggressive behavior in the area.”
Concerns that Iran’s conduct toward the war in Syria and other regional conflicts will persist or intensify dovetail with lingering doubts about the U.S. role in the Middle East and its reliability as an ally for Gulf countries. A Saudi diplomat was cited by The Washington Post as fretting that, “The relationship between the Gulf and the U.S. will stand, but it’s a very delicate situation. Maybe we’ll look to other partners like China if America is giving everything to Iran.” Many Saudis are stressing that their country now might well look to building stronger relationships with Russia and France in order to be less dependent on a security relationship with the United States. As Mohammed al-Mohya, the news anchor on Saudi Channel 1, put it, “Iran made chaos in the Arab world and will extend further after the agreement, and the GCC countries should reduce their confidence in America and turn their focus to Russia and China.” Some Saudis also say that their country will now begin to explore nuclear technology with an eye, eventually, to matching every capability Iran has developed, or is allowed under the agreement.
Even if political tensions persist to some extent, the impact of the agreement might still lead to an increase in Iranian trade with some GCC countries. The biggest beneficiary is likely to be the UAE, which, despite its territorial dispute with Iran over three islands in the Gulf, and other important disagreements, has maintained close trading ties with Iran. Dubai, in particular, stands to gain with an estimated 400,000 Iranian residents and well-established trading relationships with Iranian partners.
The Emirates’ statement welcoming the accord expressed hopes it would “contribute to strengthening regional security and stability.” An unnamed senior UAE official joined the chorus of GCC voices speculating that “Iran could play a role in the region if it revises its policy and stops interfering in the internal affairs of countries like Iraq, Syria, Lebanon and Yemen.”
My colleague Karen E. Young, at the Arab Gulf States Institute in Washington, has identified several factors that position Iran well to benefit economically from the sanctions-relief process, and how that could draw the UAE into a stronger trading relationship with Iran. Trade between the two countries reportedly fell from $8.5 billion in 2013 to $5 billion in 2014 because of international sanctions against Iran. However, Hussein Asrar Haghighi, vice-executive president of the Iranian Business Council in Dubai told Gulf News that, “We might see a huge trade growth between the two countries. Trade figures would double and business relations would be strengthened.” In June, the UAE Economy Minister Sultan al-Mansouri reportedly said trade with Iran had increased to $17 billion in 2014, but was still considerably lower than its pre-sanctions level in 2011 of $23 billion.
Oman is also expected to witness an early increase in trade with Iran following the lifting of sanctions. In the case of other GCC countries, improved political relations may be required to facilitate improved trade, which could in turn further strengthen political ties. Progress will be slow and gradual. The allure of investing in Iran’s energy industry and opportunities for mutually beneficial collaboration should be considerable. But decisions on trade will not be made in a vacuum and in most cases will require a deliberate political decision to promote better economic relations.
The economic impact of the agreement for GCC-Iran relations will be determined by perceptions about its likely strategic implications. Even if there is some expansion in Iranian trade with the UAE and Oman, if the Gulf states believe that Iran is continuing to pursue an aggressive posture in the Middle East or, worse, is intensifying its destabilizing activities, the nuclear agreement will have failed in the eyes of Iran’s neighbors. They will continue to see their security threatened, if not by nuclear weapons, then by Iran’s ongoing quest to expand its regional sphere of influence.
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