Saudi Kingdom and the Shia Islamic Republic
By Yasser Latif Hamdani
January 25, 2016
Pakistan’s attempts to engage Saudi Arabia and Iran to defuse tensions at the highest level are obviously very welcome because of the imperatives that Pakistan has, given its own large Shia population. An all-out war between Iran and Saudi Arabia holds up a terrible prospect for sectarian violence in Pakistan, which we just cannot afford. Yet one is less than sanguine about the chances of the success of such a venture. This is because Saudi Arabia and Iran are at this time already engaged in a multi-pronged economic, social and religious war with each other. This is a new kind of war, a war of attrition, the weapons of which are oil and economics as well as sectarian and ideological provocations.
From the Saudi perspective, Iran’s re-entry into the global economy, post the Iran deal, sounds the death knell for its already declining economy, dependent by up to 80 percent on oil revenues (in terms of the national budget, its share of the national GDP is 45 percent). The Shia Islamic Republic is a threat not just because it is Shia but also because it is a major oil producer that can add up to one million barrels in oil to the international market. As Iran increases its oil supply, the price of oil is likely to come down even further. While Saudi Arabia probably recognises this threat, the Saudi oil company Aramco refuses to cut supply. Speaking at Davos, Saudi Aramco Chairman Khalid Al-Falih described the oil prices at below $ 30 a barrel as being irrational and held out optimistically that the price would be higher by the end of the year. He unequivocally said that Saudi Arabia never advocated balancing the market against the structural imbalance that was emerging. In other words, Saudi Arabia is not going to cede ground to Iran for the fear that it might capture some part of the oil market after a decrease in Saudi supply. The Kingdom and the Islamic Republic are caught up in a prisoner’s dilemma. If there was any time that they needed to work together it would be this, but by executing Sheikh al-Nimr earlier this month, Saudi Arabia showed that it has its own, more sinister calculations.
The timing of the execution of Shaikh al-Nimr was well planned. It was a deliberate provocation by Saudi Arabia with the aim of strengthening hardliners in Iran. There should be no doubt that Saudi policymakers calculate that an Iran under a pro-west, moderate leadership is the biggest threat to its interests. A hard-line anti-west Iran is Saudi Arabia’s best bet in retaining regional significance. Shaikh al-Nimr’s death, therefore, was calculated to weaken the moderates in Iran. The parliamentary elections in Iran on February 26, 2016 are crucial elections and may well determine the future of an Iran deal. From all reports it seems that the moderates are losing ground in these elections. The hardliners are capitalising on the hysteria that has been created as a result of growing sectarian tensions.
For its part, Iran will do all it can to hurt Saudi Arabia’s economy. This means crushing the oil market altogether. Both sides will continue to suffer in the hope that the other side suffers more. However, this disastrous fratricidal conflict, driven largely by the ancient Shia-Sunni schism, has wider implications. For one thing falling oil prices have inflicted much damage on international markets from Dow Jones to Hang Seng. This makes no sense of course. Usually, it is a slowing global economy that drives down oil prices because of lack of demand. In this case, however, an excess of supply of oil is driving down oil prices and is causing markets to tumble. The two issues from a purely logical point of view are distinct but such is the feeling of gloom and doom that investors have been scared off globally. The big reason for this is another global giant: Russia. More than half of Russia’s national budget is dependent on oil export revenues. As Saudi Arabia and Iran push down prices, it is taking a toll on Russia as well. The conflict in Syria, which does not look like it is going to die down anytime soon, threatens to further destabilise the global economy, especially if Russia and the US are forced to face-off in that region. A wider global conflict like a third world war will hurt everybody but a majority of 1.6 billion Muslims on this planet will be the hardest hit. The rest of the world will recover but we will be driven further into poverty, backwardness and sectarian strife.
It is a great tragedy of the Muslim world that its leadership at this crucial juncture in world history is in the hands of two myopic sectarian states like Saudi Arabia and Iran, more interested in undermining each other than helping their own people secure a better life. Pakistan’s attempt, while noble in intent, to bring an end to conflict between these two Muslim powers is, therefore, likely to end in failure. The great gift of nature to these countries, i.e. oil, is going to be their undoing. Little or no effort has been made by either of the countries to modernise their economies. We in Pakistan, thankfully spared the curse of oil, must learn a lesson from the example of these two ‘brotherly’ nations. We must ensure that our policies are never determined by reactionary mullahs, sectarian bigots or theocrats of any kind.
Yasser Latif Hamdani is a lawyer based in Lahore and the author of the book Mr Jinnah: Myth and Reality.