The Islamic Republic’s grand-strategic dilemma following the deal with Saudi Arabia

Amin Naeni and Ali Fathollah-Nejad explore the tensions inherent in Iran's relationships with Saudi Arabia and China.

The March 2023 agreement between Iran and Saudi Arabia, brokered by China, has been generally seen as a testament to shifting regional and global dynamics. It is mainly seen as a major step toward putting an end to regional instability as well as a demonstration of Beijing’s rising international clout. On Iran’s part, the Islamic Republic took advantage of this opportunity to deflect the international community’s attention from the suppression of the Iranian revolutionary uprising starting in mid-September 2022 and the resulting threat of rising international isolation, pushing Tehran to finally agree to détente with Saudi Arabia. Also, Iranian authorities sought to embrace the deal as proof of the decline of U.S. power in the Middle East and the definitive advent of a post-American world order. However, much neglected in the debate, this agreement creates a key dilemma in the Islamic Republic’s foreign policy, an unstable equilibrium between its two primary grand strategies: the regional “axis of resistance” and its global "look to the East" policies.

Both the Raisi administration and state-owned media close to Supreme Leader Ali Khamenei have expressed support for the normalization of ties with Saudi Arabia. Meanwhile, the primary message of Tehran’s propaganda is to portray the agreement as a blow to the Islamic Republic’s opponents, be it Israel or the United States. In this vein, Iranian dailies have pushed forward the narrative that normalization of ties with Riyadh would bring about “a new order in West Asia” and “a new era in regional developments”. Moreover, General Yahya Rahim-Safavi, former commander of the Islamic Revolutionary Guard Corps (IRGC) and advisor to Khamenei, has described the agreement as “a political earthquake that signals the end of American hegemony in the region”, saying that Tehran’s “look to the neighbours and the East will increase Iran’s geopolitical weight”.

The curious silence of major Iranian decision-makers

However, neither of the major decision-makers in Iran, Supreme Leader Ali Khamenei himself nor the IRGC, gave special importance to the agreement, let alone hailing it as a historic turning-point as many outside observers did. It was only in late May, upon the new Sultan of Oman’s visit to Tehran and him hailing the Iranian–Saudi deal, that Khamenei broke his silence by crediting it to the Ebrahim Raisi administration’s “good policy to expand ties with neighbours and regional countries”. Such a general comment that merely echoed the administration’s stated objectives can be read as rather downplaying if not degrading the significance of the agreement with Saudi Arabia. In contrast, around ten days after the announcement of the deal with Riyadh, Khamenei in his Iranian New Year address emphasized his country's determination to support the “axis of resistance”, which in fact has been a major source of contention between Tehran and Riyadh over the last two decades.

Indeed, the Islamic Republic’s identity and survival are interwoven with the Tehran-led “axis”, making it unlikely that the Iranian leadership will sacrifice its regional influence for the sake of normalizing ties with Riyadh. A year earlier, in March 2022, Khamenei had stressed that Iran’s presence in the Middle East “is our strategic depth; this itself is a means of strengthening the Nezâm [i.e. the system of the Islamic Republic], it is a means of the power of the Nezâm. How can we lose this when we can have and should have something like this?” Moreover, while the IRGC has frequently threatened Saudi Arabia in recent years, its silence over the agreement has apparently raised concerns in Riyadh about Iran’s actual commitment to the deal.

Also, the current nuclear impasse could end up escalating. In such a scenario, according to a major architect of Iran’s nuclear escalation policy in an April interview with Der Spiegel, a war would not be limited to the U.S. and Iran but would also engulf many regional states – in other words, potentially Saudi Arabia. Such a regional conflagration would result from the failure to revive the JCPOA (the Joint Comprehensive Plan of Action or the Iran nuclear deal) and the snapback of UN sanctions triggered by the EU state signatories to the JCPOA, followed by Tehran making good on its threat to withdraw not only from the deal but also from the NPT (Nuclear Non-Proliferation Treaty). This scenario may then prompt U.S. and/or Israeli military action to block Tehran from acquiring the nuclear bomb, with Iran resorting to targeting the interests of those powers and their perceived partners in West Asia. Differently put, the Iranian–Saudi deal would be de facto sacrificed for an Iranian policy of threatening regional escalation.

China seeking regional stability: An uncertain gamble

The role of China has added an important layer of complexity to the situation. The Iranian regime has attempted to build a coalition with Moscow and Beijing, claiming that this triangle will shape the next world order. Indeed, Tehran perceives its “look to the East” policy as key not only for unlocking the political isolation of the Islamic Republic, but also empowering it to play a global role in the future. In this vein, China has helped Iran maintain its foreign revenue through oil purchases despite existing extra-territorial U.S. sanctions, amid the two countries aim to boost their relations with a 25-year partnership accord signed in March 2021. The Islamic Republic, therefore, increasingly looks to China in both the political and economic spheres.

On China’s part, China is interested in elevating its international standing through its involvement in the Middle East. The Communist Party has increasingly invested in Saudi Arabia (thereby also helping the latter realize its Vision 2030), which highlights the importance of peace and stability between Riyadh and Tehran for Beijing. However, Beijing’s goal to expand its influence and economic ties in a stabilized region could collide with Tehran's support for militia groups that would sustain regional tensions. Therefore, Chinese leaders should monitor Iran’s post-Saudi deal behaviour, while they expect to see commitment from both sides

The rise of an unstable equilibrium in Iran’s foreign policy

In this vein, Nour News, the news agency associated with Iran’s Supreme National Security Council, has stressed that the agreement with Saudis “will not change principal strategies” of Iran. This would mean that Riyadh will have to count on China’s influence in Tehran to ensure the deal’s implementation on the ground.

On the one hand, if Iran expands its support for armed non-state actors in the Middle East, it risks creating tensions with China and potentially jeopardizing its political and economic ties with Beijing. On the other hand, if the Islamic Republic weakens its “axis of resistance” strategy, it may lose its influence and “strategic depth” in the region and become more vulnerable to external pressures.

This unstable equilibrium now presents a serious challenge for the Iranian leadership. Pursuing regional ambitions and the resulting leverage (especially to be employed against the West) while expanding ties to non-Western great-powers, particularly China, requires a delicate balancing act that could have significant implications. In an interview published just a week after the deal, Ali Bagheri, reiterated the foreign policy of the Islamic Republic during the “transition period of the global order”, emphasizing two key pillars: establishing long-term agreements with countries such as China and Russia, as well as strengthening the “axis of resistance” in the Middle East. Nevertheless, the recent agreement with Saudi Arabia, brokered by China, poses challenges to these two pillars, highlighting the emergence of an unstable equilibrium in Iran’s foreign policy. Now, it remains to be seen how Iranian authorities can strike a balance when dealing with this grand-strategic dilemma.

Amin Naeni is a Ph.D. candidate and Research Assistant at the Alfred Deakin Institute for Citizenship and Globalisation (ADI) at the Deakin University in Melbourne. He is also a Fellow at the Center for Middle East and Global Order (CMEG). @Amin_Naeni

Dr. Ali Fathollah-Nejad is Founder and Director of CMEG as well as the author of the forthcoming study entitled The Islamic Republic in Existential Crisis: The Need for a Paradigm Shift in the EU’s Iran Policy (Paris: European Union Institute for Security Studies, Chaillot Paper). @AFathollahNejad

Photo by Kamran Gholami