June 7, 2017
2015 World Bank rankings. As Bloomberg put it, the move was “unprecedented … [and] designed to punish one of the region’s financial superpowers for its ties with Iran and Islamist groups in the region.”
The Saudi ‘Alliance’ Against Iran Faces New Challenges
By Shahir Shahidsaless
The signs of escalation between the Saudis and the Emirate of Qatar first appeared three days after President Donald Trump delivered a keynote speech in Riyadh during his first international trip in May. Trump gave the speech at a summit organized by the Saudis, in which 50 leaders and representatives of Muslim countries participated.
The theme of the summit was fighting terrorism and Islamic extremism. But it was an open secret that the primary goal was to single out Tehran as the world’s main sponsor of terrorism and to shape a coalition of Arab Sunni countries to isolate Tehran and ultimately change its regime. “Until the Iranian regime is willing to be a partner for peace, all nations of conscience must work together to isolate Iran, deny it funding for terrorism, and pray for the day when the Iranian people have the just and righteous government they deserve,” Trump remarked in his May 21 speech in Riyadh.
On May 24, the state-run Qatar News Agency carried comments by Qatari ruler Sheikh Tamim bin Hamad Al Thani criticizing US policies and its mounting anti-Iran sentiment. Qatari officials blamed the comments on hackers and appealed for calm. However, Saudi and UAE media outlets launched fierce assaults against Qatar and the Qatari Aljazeera network was banned in Saudi Arabia and the UAE.
The straw that broke the camel’s back was Al Thani’s telephone conversation with the newly re-elected Iranian president, Hassan Rouhani. According to the website of Iran’s president, the Emir of Qatar told Rouhani, “Our relations with the Islamic Republic of Iran are historic and firm and we are willing to further strengthen these relations.” He added, “We believe that there is no obstacle on the way of deepening Iran-Qatar relations.”
On June 5, Saudi Arabia, accompanied by the UAE, Bahrain and Egypt, severed ties with Qatar. In a display of utmost firmness, Saudi Arabia closed air, land, and sea borders with Qatar. Similarly, the UAE, Bahrain, and Egypt closed both air and sea borders with Qatar. According to the Saudi Press Agency, the decision was made as a result of “serious and systematic violations committed by the authorities in Doha over the past years with the aim of creating strife among Saudi internal ranks, undermining its sovereignty and embracing various terrorist and sectarian groups aimed at destabilizing the region.”
Although Qatar and Saudi Arabia have experienced tensions in the past – for example, in 2014, Saudi Arabia, the UAE and Bahrain recalled their ambassadors from Qatar – no measures at this level have ever been taken. What changed in the eyes of the Saudis was the unforgivable and glaring defiance by Qatar of all the efforts the Saudis had made to form a Sunni coalition against Iran - including promising to buy $110 billion in new arms from the US – a coalition in which the GCC was supposed to play the leading role. The alliance has now collapsed before it even took shape.
Qatar will surely experience tough days. The disruption of its air, sea and land links will complicate its imports, particularly its food supplies. One Qatari entity that is likely to be hard hit will be Qatar Airways. How Qataris will react remains to be seen, but it is unlikely that they will compromise their sovereignty to the Saudis’ aspirations and ambitions.
Taking into account that Oman, another GCC member, has friendly relations with Iran, and that Kuwait, another GCC member, did not criticize Qatar after the recent Iran-Qatar rapprochement, half of the GCC members are not supporting the Saudis’ in their perilous approach toward Tehran. All the excitement that emerged during Trump’s visit and the summit quickly evaporated.
The Saudis face another major challenge. On May 28, Saudi Arabia’s central bank, the Saudi Arabian Monetary Authority, reported that its net foreign assets tumbled below $500 billion ($493 to be exact) in April. Over the past three years, Saudi foreign reserves have dropped by a third from a peak of more than $730 billion in 2014.
What is noteworthy is that “the pace of the decline in reserves this year has puzzled economists who see little evidence of increased government spending, fueling speculation it’s triggered by capital flight and the costs of the kingdom’s war in Yemen,” according to Bloomberg. Simply put, Saudi Arabia’s combative policies toward Tehran have played a significant role in the depletion of the kingdom’s foreign reserves.
Just in the first four months of 2017, for example, Saudi reserves have already declined another $36 billion, according to Bloomberg. This figure represents almost 7% of the country’s foreign assets. This is despite the austerity measures that have been in place since last year. If oil prices remain in the $40 range this year, there would be an even greater drain on Saudi finances. This begs the question of whether the Saudis can afford huge new arms purchases from the US. Indeed, some experts have suggested that the deal is really “fake news” -- a compilation of old letters of intent that may never be realized but was announced to give Trump something to brag about.
One should not forget that from 2014 until last year, Saudi Arabia refused to cut its oil production despite sliding prices. The kingdom argued that it wanted to protect its market share at any cost after the emergence of shale oil producers in the US. They wanted to crush American frackers. As late as February last year, Adel Al Jubeir, the kingdom’s foreign minister, said, “If other producers want to limit or agree to a freeze in terms of additional production that may have an impact on the market, Saudi Arabia is not prepared to cut production.” He added, “The Kingdom of Saudi Arabia will protect its market share and we have said so.”
But there seemed to be a consensus among analysts that weakening Iran was part of the Saudis’ plan to keep pumping oil and refusing any cuts despite the persistent oversupply in the global markets.
As pressures finally mounted in November 2016, the Saudis, together with other OPEC members, accepted a cut to their output by 1.2 million barrels per day for six months and extended the output for another 9 months in May. Some reports maintain that Saudi oil exports fell by more than 670,000 barrels a day in April from October levels in an effort to boost oil prices.
To sum up, Saudi Arabia is in a serious predicament should it wish to continue pursuing its policies toward Tehran both financially and politically. The kingdom’s problems may compound if it becomes isolated in its mission to destabilize Iran and oil prices do not rebound within the next twelve months.
Shahir Shahidsaless is an Iranian-Canadian political analyst and freelance journalist writing about Iranian domestic and foreign affairs, the Middle East, and the US foreign policy in the region. He is the co-author of Iran and the United States: An Insider’s View on the Failed Past and the Road to Peace. He is a contributor to several websites with focus on the Middle East as well as the Huffington Post. He also regularly writes for BBC Persian. He tweets @SShahisaless