The Middle East Channel

Iran and the U.S.-Saudi Bargain

For the past 30 years, the United States has treated Saudi Arabia as its primary partner in the Persian Gulf and perhaps even the Middle East at large. While the two countries have cooperated on a number of issues, including preventing Soviet expansion and counterterrorism, the relationship at its core is based on a simple bargain: Saudi Arabia receives a U.S. security guarantee in exchange for ensuring the stability of global oil prices. Of course, Saudi Arabia is an autocratic Salafist state and the United States is a multiethnic democracy so they have naturally long differed on a variety of issues. But such divergent interests -- never insignificant -- were papered over, ignored, or resolved by unilateral compromise in the interests of preserving the basic bargain.

However, as the Middle East has changed over the last decade (the Iraq War, the Arab Spring, the diversification of energy supplies), these disagreements have grown both more public and frequent. Bitter rows over Egypt and President Barack Obama's unwillingness to intervene in Syria have led senior Saudi officials to question U.S. resolve and commitment to the region. 

But nowhere has U.S.-Saudi tension been more apparent than on the Iranian issue, as Saudi opposition to a prospective nuclear deal surpassed even that of Israel. The contretemps over Iran's nuclear program masks a deeper conflict between the United States and Saudi Arabia over Iran's place in the Gulf and the broader region. Whereas the United States views Iran's return to the international fold as a potentially salutary development, Saudi Arabia regards this possibility as a crippling blow to the kingdom's regional standing and an existential threat to the ruling al-Saud family.

In other words, the problem is not that Saudi Arabia does not see the specific terms of the interim agreement negotiated in Geneva as unacceptable; the problem is that it views any nuclear agreement that loosens the shackles on Iran as unacceptable. Riyadh sees itself as engaged in a zero-sum competition with Tehran in which any improvement in the U.S.-Iranian relationship would necessarily come at its expense. Saudi Arabia does not just want the United States to consider Saudi interests when dealing with Iran, but rather wants the United States to always choose the Saudi side when their interests conflict with the Iranians'.

Riyadh believes the United States faces a stark choice between an antagonistic regime and a reliable friend, chaos and stability, and war and peace. In this view, Iran's status will determine the fate of the region. On this, the Saudis are not completely wrong. The stakes involved in a nuclear deal are, indeed, great, but it is an isolated Iran -- not a normalized Iran -- that threatens to tear the region apart. And, if the price of preserving the grand bargain has become war against Iran, it is time for the United States to re-evaluate the assumptions of its Gulf policy.

U.S.-Saudi relations have always been predicated on a security-for-oil quid pro quo, although bilateral cooperation along these lines reached a new level of intensity following the 1973 oil embargo and the 1979 Iranian Revolution. What these terms mean has often been misunderstood, particularly in terms of what the Saudis provide to the United States, but their practical application is not very complex and both countries have benefitted from the arrangement. The United States has served as Saudi Arabia's last -- and sometimes first -- line of defense against external threats to the kingdom. Originally, Saudi Arabia wanted U.S. assistance in thwarting Soviet designs on the Gulf, but with the Iranian Revolution the Saudis sought and received protection from two nearer enemies, Iran and Iraq. The most well known example of U.S. intervention on Saudi Arabia's behalf is, of course, the Gulf War, but the United States also played an important role in escorting oil tankers through the Persian Gulf during the Iran-Iraq War.

In exchange for U.S. protection, Saudi Arabia has reliably exploited its status as the swing producer of oil to stabilize the price of this commodity, which is so critical to the global and U.S. economy. It is widely thought that the Saudis use their disproportionate share of daily oil production to keep prices low, but, as the current price of around $100 per barrel attests, this is not the case. What Saudi Arabia, with its unrivaled spare capacity (estimated at 2 to 3.5 million barrels per day), actually does is bring additional production online to prevent rapid, destabilizing spikes in the price of oil. Advanced industrial economies can handle almost any conceivable oil price, as long as they have time to make adjustments to consumption patterns. However, rapid price increases deprive them of the opportunity to adapt, leaving the international economy fully exposed to the dislocations caused by the price fluctuation. During the Gulf War, the Saudis ramped up their production capacity to offset the loss of Kuwaiti and Iraqi oil in the market. More recently, the Saudis upped their production to over 10 million barrels per day, a 30-year high, to control prices during Libya's civil war.

Beyond the basic bargain, the United States and Saudi Arabia provide diplomatic and intelligence support to each other on a variety of issues. For the United States, seeking Saudi support, particularly financial support (the "Saudi ATM"), is a fixture of any policy initiative in the Middle East and the kingdom has been intermittently helpful on a range of U.S. interests in the region, including the Israeli-Palestinian peace process, Yemen, and Syria. The U.S. and Saudi joint interest in combatting violent and extreme Islamists has led to intelligence cooperation against the groups that threaten them both, many of which have ties in Saudi Arabia.

The potential deal between Iran and the permanent five members of the U.N. Security Council plus Germany on Iran's nuclear program opens up new possibilities in U.S.-Iranian relations. Of course, that deal remains very tenuous. Even it were to come to fruition, one deal, no matter how important, will not build the trust necessary to overcome 30-years of enmity. And it will not make the United States and Iran see eye to eye on issues such as Syria or Iranian support to Hezbollah. U.S.-Iranian relations will, at best, remain prickly, mistrustful, and distant for some time to come.

But the United States and Iran don't need to be the best of friends to cooperate effectively on a range of issues that are important to both. They just need to cease to be the worst of enemies. That means they need to recognize that they can cooperate on issues in which they can find mutual benefit while they can simultaneously compete over issues on which they don't agree, as do most countries. There is precedent for U.S.-Iranian cooperation over specific issues of mutual benefit, particularly during the occasional brief periods of relative calm in the U.S.-Iranian relationship. Thus, for example in 2002, the United States and Iran were able to cooperate in effectively in Afghanistan.

Within that context, there are several issues of mutual interest on which the United States and Iran might be able to form hard-nosed bargains. On Iraq and Afghanistan, in particular, the United States may find that its interests accord more with Iran than with some of its more traditional partners in the region. The United States and Iran already see a mutual interest in stabilizing Iraq and its government and assisting it in its effort to combat the Sunni extremists that threaten it. Saudi Arabia is likely to be of relatively little assistance in this effort as it supports the extremists in Iraq. In Afghanistan, the United States and Iran will want to work together to ensure that after the NATO withdrawal at the end of 2014, the Taliban do not return to power in Kabul or otherwise further threaten regional stability. Once again, traditional allies such as Saudi Arabia or Pakistan will not likely take as great an interest in achieving this goal as Iran might, or might actually work at cross-purposes to the United States as they often have in Afghanistan. Syria will prove a much greater challenge for cooperation, but even there, if the current stalemate drags on for many years, as seems likely, Iran may find that cooperation with the United States on a power-sharing agreement is its only route out of a Syrian quagmire.

The United States and Iran will also see a mutual benefit in bringing Iran's oil and gas back to market. The unwinding of sanctions will immediately reduce risk premiums on all oil flowing through the Gulf and put over 1.5 million barrels per day of crude back onto the global market, which would reduce oil prices instantly. But more than that, Iran's oil and gas industry, which has been lacking in Western technology and investment for decades, has the potential both to relieve future supply bottlenecks and to help in the globalization of the gas market. The presence of Iran on the global market as both gas exporter and a transit county would in the coming years destroy any hope Russia has of maintaining its gas stranglehold on Europe or on establishing one on South or East Asia.

Saudi fears of Iran transcend the Iranian nuclear program and the possibility it could acquire a breakout capability. What really inspires fear in Saudi Arabia is Iran itself, as a geopolitical and economic threat to its place in the region and, more importantly, the reigning al-Saud family's hold on power.

Saudi Arabia's fear of Iran results from its perception of three distinct, though reinforcing threats. First, Iran poses a danger to Saudi Arabia's external security. The kingdom -- wealthy, militarily weak, sparsely populated, and occupying poor defensive terrain -- recognizes its potential vulnerability to the Persian behemoth across the Gulf. In realist terms, Iran is a natural regional hegemon with its relatively large population and rich natural resources and its rise, irrespective of direct action against Saudi Arabia, would threaten the country's status as the pre-eminent Muslim country in the Middle East. Second, Saudi Arabia sees Iran as a threat to its internal security. The kingdom has long feared Shiite Iran's supposed ability to precipitate a rebellion by Saudi Shiites -- some 10 percent of the population -- in the strategically critical and oil-rich Eastern Province. Even more fundamentally, the Islamic Republic with its alternative model of an Islamic state is perceived as a threat to al-Saud's legitimacy, which rests on the family's relationship with the Wahhabi religious establishment. Third, and finally, the reintroduction of Iranian oil and gas to global markets, as described above, would depress internal energy prices and decrease Saudi export revenue, key to its expansive welfare state.

In this context, the international sanctions regime on Iran that restrained its ambitions and capacity for power projection has become a pillar of Saudi foreign policy. From this point of view, a nuclear deal would not rehabilitate, but rather free a dangerous regional rival to harass and threaten the kingdom. That the United States, the guarantor of Saudi security, could prove the enabler of its greatest enemy makes the situation all the more devastating for Saudi Arabia. Dovetailing with the sense that the United States is abandoning the Middle East as part of its pivot to Asia, Iran's return from the cold at America's behest would represent a practically cataclysmic development in Saudi eyes.

It is clear that Saudi Arabia is viscerally opposed to any nuclear deal with Iran, but why does it matter to the United States? What can the Saudis do to damage U.S. interests if their preferences are flouted? Many observers have pointed out that Saudi Arabia's share of world oil production is steadily decreasing at the same time as the United States is tapping into new energy sources, suggesting that Saudi leverage is declining. But it is not Saudi Arabia's total supplies that permit it to prevent price spikes but, rather, its spare capacity. While it is true that the United States will soon pass Saudi Arabia in oil production, it will not be able to replicate the Saudi model and hold substantial capacity in abeyance. U.S. oil companies are unlikely to forego additional profit and, more importantly, American consumers will not tolerate a government policy that, through intentionally limiting supply, sustains higher oil prices.

From the Saudi perspective, U.S. participation in a nuclear deal with Iran could be perceived as a failure to uphold its commitment to Saudi security. As such, Riyadh may abandon its side of the bilateral bargain and take no action against a potential spike in oil prices. But this misses that in the presence of an unshackled Iran, Saudi Arabia will need U.S. protection even more and, despite its likely anger, would be foolish to upset the basic terms of the bargain. No matter how angry they become, the Saudis have no other place to go for that protection.

As is often said, to govern is to choose. But the United States does not govern the Persian Gulf and does not want to. It is an outside power that seeks to secure a few hard-nosed interests, particularly regional stability, the free flow of energy, and the prevention of terrorism. This requires balance more than governance. And quite clearly, to balance is not to choose.

There are no democratic states in the Persian Gulf and no potential ideological alignments for the United States. Iran is a repressive oligarchy that provides support for Hezbollah terrorism and insurgency throughout the region and beyond. Saudi Arabia is an even more repressive autocracy that provides support for Sunni extremists and insurgency throughout the region and beyond. So there is no superior moral or geopolitical choice for the United States. Every U.S. relationship there will necessarily be transactional rather than strategic -- regardless of the rhetoric that all sides may employ about historic ties and enduring friendship. Such bonds did not prevent the Saudis from creating an oil embargo in 1973 or from threatening "a major shift" in Saudi-U.S. relations as a result of the prospective nuclear deal with Iran.

At the end of the day, the Gulf states have always cooperated with the United States because it serves their specific, usually short-term, purposes to do so. They see a value for their domestic security in counterterrorism cooperation. They recognize that they need the U.S. presence in the region to maintain regional stability and ensure the free flow of commerce on which they all heavily depend. The United States is not considering abandoning that role, despite some regional fears to the contrary. And none of the states in the Gulf, Iran and Saudi Arabia included, have any other place to turn for another power that can fulfill that role. Saudi nuclear cooperation with Pakistan will not secure the sea lanes of the Persian Gulf. Iranian investment deals with China will not encourage the People's Liberation Army Navy to venture so far from its shores.

It makes sense therefore for the United States to keep its options open as it seeks to find a balance that supports its interests in the Persian Gulf. It should not accept the demand from any Gulf partner that the United States must choose sides. That would not be a bargain worth making.

Jeremy Shapiro is a visiting fellow with the Foreign Policy program at the Brookings Institution. From 2009 to 2013, he served in the U.S. State Department on the policy planning staff and in the bureau of European and Eurasian affairs and currently consults for the policy planning staff. The opinions and characterizations in this article are those of the author, and do not necessarily represent official positions of the U.S. government.

FAYEZ NURELDINE/AFP/Getty Images

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