The Impact of Iranian-Saudi Normalization

  • Middle East Policy

    Middle East Policy has been one of the world’s most cited publications on the region since its inception in 1982, and our Breaking Analysis series makes high-quality, diverse analysis available to a broader audience.

Policy Brief Program

March 2023

10 Cents

Q: What’s new in Iranian-Saudi relations?

A: On March 10, Iran and Saudi Arabia announced that the two countries would normalize relations for the first time in seven years, with embassies reopening within the next two months. The agreement came after months of deliberations and four days of talks mediated by China.


Q: Does this agreement mean that the two countries will move towards friendly cooperation?

A: While the agreement is historic in nature, many analysts have stressed the importance of not overstating the warming in relations between the two countries. Marwan Bishara of Al Jazeera warned not to “expect the long archrivals to turn archangels…There remains a great deal of distrust and too many points of friction to tackle and resolve.” 

The overall reaction to the agreement was one of cautious optimism, as several parties nodded towards the regional stabilizing potential of the agreement. Shortly following the deal, Iranian President Raisi accepted an invitation from King Salman to visit Saudi Arabia, a sign that both governments are committed to fostering legitimate diplomatic relations.


Q: Why were relations severed previously?

A: Iran and Saudi Arabia have competed in the Middle East for decades, and tension between Saudi Arabia’s Sunni royal family and the Iranian Shiite majority has often led to conflict. The relationship between the two countries deteriorated in 2016 when the Saudi government executed Nimr al-Nimr, a Shiite cleric. Protesters in Tehran responded with an attack on the Saudi embassy, and Saudi Arabia ceased diplomatic relations with Iran. 

The relationship worsened in 2018, when Saudi Arabia said that it would consider developing nuclear weapons if Iran continued with proliferation efforts. In 2019, Riyadh blamed Tehran for a series of drone and missile strikes on Saudi oil facilities, and Iran threatened “all-out war” in the case of a retaliatory attack.


Q: How will this normalization impact proxy conflicts?

A: Iran and Saudi Arabia operate on opposite sides of many conflicts in the Middle East; thus, many believe that this normalization will contribute to peace efforts. A representative for Hezbollah in Lebanon said that the positive impact of the agreement “would be felt in Lebanon, Yemen, Syria, and the region.”


Q: How will normalization impact the conflict in Yemen?

A: In Yemen, the civil war between the Iranian-backed Houthi rebels and the Saudi-backed government has created one of the world’s worst humanitarian crises. While some Yemeni officials are concerned that cooperation between Saudi Arabia and Iran may lead to an abandonment of Yemen by Riyadh, the government publicly welcomed the agreement as “the start of a new era in regional relationships, and an end to Iran’s interference in Yemeni affairs.” 

On March 16, it was announced that Iran has agreed to stop arming the Houthis, fueling hope for peace after eight years of deadly conflict. 


Q: What is the significance of China’s role as mediator?

A: Many analysts have discussed the apparent willingness and ability of China to expand engagement in the Middle East to include diplomatic efforts, a realm that has traditionally been dominated by the United States. However, the Chinese government has remained adamant that “China has no intention to and will not seek to fill the so-called vacuum or put up exclusive blocs.”


Q: How has the United States reacted to the agreement?

A: Publicly, the Biden administration reacted positively to news of the Iran-Saudi deal. 

John Kirby, spokesperson for the White House National Security Council, said the following: “Generally speaking, we welcome any efforts to help end the war in Yemen and de-escalate tensions in the Middle East region. De-escalation and diplomacy together with deterrence are key pillars of the policy President Biden outlined during his visit to the region last year.”


Q: What are the economic implications of normalization?

A: Iran and Saudi Arabia are the two largest economies in the Middle East behind Turkey, and the May 1998 agreement, which will be reimplemented as part of normalization, reopens avenues of bilateral trade and development. 

News of the deal was welcomed in Iranian markets; the value of the rial increased by over ten percent on the day following the announcement.


Q: How is this anticipated to impact Israeli foreign policy ambitions, such as deterring Iran or expanding the Abraham Accords?

A: Israel, who has been looking to expand relations with Saudi Arabia, views Iran as the biggest threat to its security. Just last month, Israeli Prime Minister Benjamin Netanyahu referred to a peace agreement with Saudi Arabia as “a goal that we are working on in parallel with the goal of stopping Iran.” 

In light of this, former Israeli prime minister Naftali Bennett, characterized the normalization deal as a “fatal blow to the effort to build a regional coalition against Iran.”

Another fear of Israel is China’s growing involvement in the region; Israeli officials are reportedly concerned that “in Tehran there is a belief China’s involvement in the region will shield them from an attack by Israel if Tehran pushes towards a nuclear bomb.”

  • Middle East Policy

    Middle East Policy has been one of the world’s most cited publications on the region since its inception in 1982, and our Breaking Analysis series makes high-quality, diverse analysis available to a broader audience.

Scroll to Top