The Strategic Calculus behind the Saudi-Iranian Agreement
Length: • 13 mins
Annotated by Marco
In a statement on March 10, seven years after Saudi Arabia cut diplomatic ties with Iran, the two regional powers agreed on a deal to restore relations. Negotiations for this deal witnessed ups and downs in the last two years as it was mediated by the Iraqi, Omani, and, most recently, Chinese governments. In the end, talks persisted and ended successfully, highlighting the mutual political will to resort to diplomatic means to address grievances.
While the reconciliation seems to be a tactical de-escalation that serves mutual interests it is not a grand bargain. It does not change the strategic calculus of either side in a revolutionary way and it is therefore unlikely to significantly transform the regional security environment in the short term. Indeed, there will be many continuities rather than changes in Saudi-Iranian relations.
However, the importance of the deal in building mutual trust and paving the way for the next steps toward regional integration cannot be underestimated. As observers have explored in detail, the transformation toward a peaceful and cooperative security system in the Gulf is a step-by-step process in which Saudi-Iranian reconciliation is one of its inevitable phases. The key questions now are what efforts should be made to make the current positive political climate durable, and how the agreement could be immunized to the obstacles ahead. To answer, however, one should have a better grasp of Tehran’s and Riyadh’s motives, the limits which the deal faces, and the role that spoilers can play in this process.
What is the Calculus in Riyadh and Tehran?
Riyadh and Tehran have followed their own unique motives and pursued rather different objectives in striking an agreement. This mismatch is both an opportunity and a risk; on the one hand, it risks a situational and transactional deal, and therefore a fragile reconciliation as either side can potentially change course if objectives are met. Divergent objectives and questions regarding whether the deal is genuine or not highlight the challenges of making reconciliation a more long-lasting process. On the other hand, an opportunity also exists as the purely interest-based nature of the deal opens up space for expanding areas of mutual interest.
Riyadh’s Strategy
From Saudi Arabia’s strategic perspective, the deal shifts the rivalry to the economic realm and away from political and security-based competition because the latter is costly for both sides. Having said that, the direct reasons for Saudi Arabia to sign this agreement can be explained in six points:
First, Saudi Arabia’s perception of the changing priorities of the United States in the last decade has changed the Kingdom’s security calculations. The United States’ desire to disengage from the MENA region and move its military and diplomatic resources to better serve its competition with China; President Obama’s nuclear deal with Iran in 2015 and his declared policy that Iran and Saudi Arabia “need to find an effective way to share the neighborhood and institute some sort of cold peace;” and the lack of U.S. intervention against the Houthi drone attack on oil giant Aramco’s facilities—which Saudi authorities suggested is backed by Iran—have convinced Riyadh that it can no longer rely solely on Washington for its security.
In response to these changing security calculations, the Kingdom’s choice is to either calm hostilities with Iran or complement the existing security guarantees it has from the United States by using great power competition to its advantage and diversifying its security fulfillment. Riyadh seems to have chosen a combined strategy. On one hand, there is diplomatic engagement with Iran to complement deterrence with diplomacy. And on the other, Saudi Arabia seeks to benefit from opportunities of multilateral diplomacy to bring in a new political guarantor that has more leverage over Tehran, which in this case is China. It is important to note that these adjustments do not reflect an attempt to replace the United States—rather they mean to engage with China in the areas where U.S. policy has proven to be insufficient and/or ineffective.
Second, Saudi Arabia has no interest in any war in the Gulf region. The failure of the U.S. maximum pressure policy on Iran, Tehran’s policy of increasing uranium enrichment, and Israel’s threats to bomb Iran’s nuclear facilities have precariously placed the region on the verge of war. Saudi Arabia does not want to be part of this escalation that will undermine its security and delay its social and economic transformation. An opening with Iran sends a clear message to the Iranians, the United States, and Israel that the Kingdom is not willing to risk direct war with its neighbor.
Third, when it comes to Iran, Saudi Arabia’s security priorities are concerned with the Islamic Republic’s support for Shiite groups, mainly in Yemen and Iraq, in addition to its advanced conventional missile program. Those two priorities are not part of the talks between the United States and their European partners with Iran. While Saudi Arabia is fully aware that Iran won’t put restrictions on its missile program, it believes that normalization of relations is an alternative path that might contribute to the region’s stability, especially in Iraq and Yemen.
Fourth, and at least for the next decade, Saudi Arabia’s priority is its social and economic transformation program as explained in Vision 2030. Saudi Arabia understands that the window of opportunity to pull off such a transformation is conditioned on the region’s stability—which can only be achieved by having normal relations with Iran. Accordingly, the Kingdom believes that if taking sides with any of the great powers, particularly Western ones, raises tensions with Tehran, it will only harm its social transformation program. That is why, for example, the Kingdom opted for a policy of strategic ambiguity toward Ukraine, which helped it protect its interests from the negative consequences of Russo-Western tensions.
Fifth, Saudi Arabia has strategic economic and security interests with China. The agreement with Iran, brokered by China, solidifies the relations between the two countries. More importantly, because China has both political and economic leverage over Iran, it makes the latter more inclined to fulfill its obligations in the agreement, so as to not negatively impact its ally’s image and risk a negative response—a consideration previous attempts at an agreement with Iran were missing. In other words, Saudi Arabia hopes that China’s presence can guarantee a more durable agreement.
Sixth, the stability of the region is what matters most for Saudi Arabia because rivalry is costly. Saudi Arabia is not signing the agreement for charity purposes; it understands that transforming the region from a zero-sum game has major economic benefits for the Kingdom including, but not limited to, benefiting from Iran’s big market as the relations between the two nations improve.
Tehran’s Strategy
On the other side, the Iranian motive for the deal falls under a broader strategy of decoupling from the West through two key foreign policy strategies of “look to the East” and the “neighborhood policy”. The former calls for stronger ties with China and Russia while the latter prioritizes Iran’s fifteen neighboring countries as the main economic and political partners. While the deal brings President Ebrahim Raisi’s administration a diplomatic victory after months of failures and stalemate in key foreign policy issues, the actual motives that led to the Islamic Republic’s systemic decision to agree to the deal seem more complex.
First, the Islamic Republic is facing unprecedented anti-government protests after the killing of Mahsa Amini in police custody. This has contributed to the perception of vulnerability and fear for the regime’s survival. In the meantime, the Iranian security establishment is convinced that Saudi Arabia is funding a media campaign led by the Persian-speaking “Iran International TV”. The Iranians claim that this campaign is highly effective in influencing the Iranian public and impacting the course of protests. The Islamic Republic has indeed lost the battle over the information space as even officials attest, and the key state-owned radio and television channels have lost their positions among the population. These dynamics have changed the balance between Riyadh and Tehran. While previously Tehran had confidence in its better position due to influence in Yemen, the dynamic post-September 2022 protests has revealed its vulnerability to Riyadh’s instruments of influence. Saudi Arabia’s new leverage provided the Kingdom with a powerful bargaining tool to negotiate: Iran tones down its support for the Houthis and Saudi Arabia tones down its support of anti-Iranian propaganda.
Second, Tehran views a deal with Saudi Arabia as a way to pursue its nuclear policy with a freer hand. As a strategic principle of conduct in Iran’s security policy and in order to prevent facing a resource deficit, Tehran has always avoided confronting several foreign policy crises simultaneously. In the current political environment in which hopes for the revival of the Joint Comprehensive Plan of Action (JCPOA) are low, tensions over the nuclear dossier have no reason to abate. Although through case-by-case agreements with the International Atomic Energy Agency, parties have attempted to lower tensions, there is no sign suggesting a change in Tehran’s nuclear policy. Through a deal with Saudi Arabia, Tehran believes it can avoid facing a major regional crisis while managing tensions with the U.S. and Israel over the nuclear issue. The deal also helps Iran leverage its rapprochement in the region to push for a better nuclear deal with the United States and even in an extreme scenario may seek Saudi’s help in nuclear de-escalation.
Third, the deal for Tehran has strategic value in deterring future Saudi-Israeli security cooperation. Notwithstanding how remote Saudi-Israeli normalization is, the prospect of a Riyadh-Tel Aviv security collaboration against Tehran has become a heavier weight in Tehran’s threat perception. Tehran seems to be aware that restoring diplomatic relations with Riyadh is no guarantee to preventing Saudi-Israeli normalization because of changing dynamics of regional relations. However, what it hopes for is to use the principles of non-intervention and respect of sovereignty mentioned in the joint statement with Saudi Arabia as a pretext to prevent an emergence of a region-wide anti-Iranian security alliance—a plan which the Israeli side has wishfully advocated for. As some Israeli sources claim, the deal has already cast a large shadow over potential military deals between Tel Aviv and Arab capitals. Tehran believes it can successfully add another layer of complexity to Israeli military plans through reconciliation with Riyadh.
Fourth, the deal helps the Islamic Republic stabilize its gains across Syria, Iraq, and Lebanon. In these hotspots in which Iran has an upper hand, toning down competition with Riyadh can help Tehran maintain the status quo. Syrian President Bashar Al-Assad’s March visit to the UAE and the recent hint at the potential restoration of Saudi-Syrian diplomatic relations is laying the groundwork for other Arab states to reconcile with Damascus. Though these dynamics will also open the door for Riyadh to exert influence in these places, it narrows tacit support for anti-Assad opposition groups. Tehran believes that this new dynamic will help stabilize its key regional partner in the long term. Besides, as proven in the case of Iraq where despite U.S. presence Tehran maintained its influence, the Iranians seem confident that Saudi Arabia’s entrance in Syria will not endanger their interests in a strategic way.
Fifth, Tehran views Chinese involvement in Gulf security issues as a stage of de-Americanization of the regional order. It believes an increase in the number of multilateral formats and diplomatic initiatives with no Western presence will eventually contribute to weakening the U.S.-led security architecture. Tehran prefers to drag in China in Gulf security affairs as part of this process. Naval drills with China and Russia are examples of this process which Tehran believes can contribute to stronger Chinese presence and limit U.S. freedom of action.
Sixth, Iran knows that its edge in drones and high-tech missiles will not last forever. In fact, Iran is aware that Saudi Arabia is developing its own missile and drone technologies with Chinese assistance, and is working with the U.S. for more efficient anti-drone and missile defense capabilities. Thus, it is in Iran’s interests to have an agreement with Saudi Arabia now, before its comparative advantage in inexpensive drones and low-cost missiles ends.
Challenges Embedded in the Agreement
The last decade has pushed Riyadh-Tehran relations beyond classical political and religious rivalries. It is the securitization and militarization of relations that have become the dominant trend in this period. Despite the opportunities the agreement presents to resolve regional problems between the two countries, it will remain vulnerable to the security policy of both countries.
Security Tensions
On the Saudi side, Riyadh will continue to improve its missile defense and anti-drone capabilities by working with China, the United States, and other partners. It will also seek to acquire nuclear technology know-how, albeit for civilian use, and it will do what it needs to strengthen its indigenous military industry, which Iran might perceive as a threat to its security. Moreover, Saudi Arabia will open up politically and economically to countries such as Syria, Yemen, Lebanon, and Iraq because it believes that stability and security in the region can be enhanced through economic prosperity. However, Iran might see such an opening as a threat to its influence in the region. More importantly, as Saudi Arabia will seek to maintain strong ties with the United States for historical and security reasons (the U.S. remains the Kingdom’s main military supplier) Iran might remain skeptical of the consequences of these relations as it seeks to expel the United States from the region. Finally, as Iran is a nuclear threshold state close to developing nuclear weapons if it so desires, Saudi Arabia has an interest in maintaining some pressure on Iran to return to the nuclear deal. Iran might perceive this as an unconstructive gesture that goes against the spirit of the agreement.
Tehran views the military aspects of the above developments as a threat to the regional offensive-defensive balance. It will therefore likely continue efforts to launch proper countermeasures. Although Tehran may agree to limit equipping the Houthis with new advanced offensive weapon systems, the policy of upholding an Iran-backed axis of resistance as a pillar of the country’s deterrence in the region is unlikely to change as long as its military has limited conventional alternatives and the U.S-Israeli threat remains unchanged. This means Tehran will continue the policy of qualitative improvement of the axis of resistance’s operational capability, including through horizontal operational linkages among Shiite groups and raising their interoperability capabilities.
In a similar vein, Iran’s support for Saudi peace talks in Yemen, by pressuring the Houthis to tone down provocations, cannot be interpreted as Tehran’s willingness to drop its power instrument there. That means complexities in Yemen may persist. Tehran views Yemen as a strategic corridor that guarantees operational access to Saudi Arabia’s inland during a hypothetical conflict. Iranian influence in Yemen is viewed as a critical asset in imposing a logistical burden on the Saudis and maintaining deterrence against the Kingdom. Furthermore, the perception of Saudi Arabia as a military threat has impacted Iran’s weapon choices and basing programs. For example, Iran has been reinforcing its military bases close to the Gulf coasts to increase its stand-off capabilities against the littoral Arab states. It is hard to imagine changing such long-term military planning if reconciliation remains limited to just restoring diplomatic ties. Consequently, Saudi arms purchases to thwart the perceived Iranian threat will likely continue as well.
When it comes to the nuclear dossier, the dynamics between Iran on one hand and the U.S. and Israel on the other, will remain the critical variable in determining outcomes. Therefore, this issue will not be meaningfully impacted by the Saudi-Iranian detente. That means that the Kingdom’s fear of Iran getting nuclear weapons will persist if U.S.-Iran talks continue to falter—a fact that may force Saudi Arabia to build up its own nuclear capability at some point. Any change in Riyadh’s nuclear policy will then contribute to Iran’s nuclear calculus and proper response. Thus, the complex puzzle of the U.S.-Iran-KSA-Israel nuclear conundrum will remain in place.
In short, deterrence and containment will remain a core policy for both sides. Diplomatic normalization will certainly help to calm tensions, but it will be insufficient to reverse these trends. By looking at U.S.-Russia relations, one might gain an understanding of how a combined strategy of deterrence and containment can remain in place and generate tensions while diplomatic ties exist.
Domestic and External Spoilers
Beyond the complexities between the Saudi and Iranian governments, reconciliation between the two countries is vulnerable to a set of domestic and foreign spoilers. On the domestic front, hardline voices in both countries have benefited to a certain extent from the demonization of the other. While on the Saudi side, voices skeptical of Iran can still impact policies and inject suspicions about the usefulness of the deal, the challenge on the Iranian side is even greater. The Islamic Republic’s key foreign policy projects have proven to be vulnerable to factional rivalries. It is true that conservative forces now in power in Tehran seem to be united in support of the deal, but it is not unimaginable that competition in the next presidential election makes tensions with Saudi Arabia once again beneficial to some factions.
External spoilers to the deal are also considerable. The agreement has made Israel nervous and has provoked sharp criticism within the prime minister’s office, as well as opposition leader Yair Lapid who called it “a total and dangerous foreign policy failure of the Israeli government”. As the main regional force negatively impacted by the deal, Israel received a blow to its strategic goal of teaming up with Arab states around the common threat of Iran. Israel may be convinced that the so-called “Iranian threat” is no longer a point of convergence with Arab states but at the same time it may seek ways to disrupt Arab-Iranian reconciliation so as to avoid more regional pressure. For example, continued Israeli strikes in Syria—which killed members of the Islamic Revolutionary Guard Corps—since the agreement was struck can escalate tensions and jeopardize the deal if Iran decides to respond.
While the agreement did not resolve Iran and Saudi Arabia’s security issues, the current historical opportunity—at least in the short term—has opened the door to change the security architecture of the Gulf region in a way that serves the entire Middle East.
For this to happen, the two countries need to negotiate and resolve their disagreements over Yemen, Iraq, Lebanon, and Syria. The first step to make the deal durable is for policymakers on both sides to acknowledge the challenges and spoilers that can threaten to abort the agreement’s benefits. Expanding different levels of communication including at the ministerial, parliamentary, think tank and NGO, and people-to-people levels would help in overcoming these challenges. In addition, since military-security concerns will remain the most serious concerns for both sides, more intense security talks should be continued and prioritized. The two sides need to continue dialogue on their core threat perceptions and help each other better understand each side’s security grievances. Finally, while U.S. sanctions against Iran prevent economic integration between the rival states, Tehran and Riyadh can work together on less sanctionable aspects of economic cooperation, and on areas such as maritime security, climate change, and renewable energy, and coordinate better on their energy policy.