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China Brokers Iranian/ Saudi Relations Deal

Iranian & Saudi Relations Deal Brokered by China

March 20, 20231703 view(s)

On Friday, March 10, Iran and Saudi Arabia agreed to reestablish relations and re-open embassies within two months. Iran and Saudi Arabia have had no diplomatic relations since 2016 following a raid of the Saudi embassy in Tehran after Saudi Arabia executed a Shi’ite Muslim cleric. 

Saudi Arabia and Iran are the Middle East's leading Sunni and Shi'ite Muslim powers. Both sides have been fighting on opposite sides of proxy wars around the region, particularly in Yemen and Syria. China hosted an undisclosed four-day summit between Iran and Saudi Arabia to broker the deal. The released statement said, “The agreement includes their affirmation of the respect for the sovereignty of states and the non-interference in internal affairs.” 

An alarming change is Iran's statement about Saudi Arabia's nuclear position. Saudi Arabia has been a staunch opponent of Iran obtaining nuclear weapons. However, a senior Iranian official told Reuters that "Saudi Arabia will encourage the West to reach a nuclear agreement with Iran." 

The summit happened as Chinese President Xi Jinping received a third term as president. The U.S. relations with Saudi Arabia, Iran, and China are all tense at the moment. The Atlantic Council listed the public responses of more than a dozen Middle East and China experts. Overwhelmingly, the experts said that China brokering the deal diminished the U.S. political influence in the region and supercharged China. 

The growing rift between the U.S. and Saudi Arabia has accelerated under the Biden administration. Candidate Biden said Saudi Arabia should be a pariah country for the 2018 killing of journalist Khashoggi. In October 2022, the Biden administration threatened Saudi Arabia with "consequences" for failing to postpone reducing oil production until after the election. OPEC announced oil production cuts in September. OPEC ignored Washington's pressure and stated that the cuts were necessary due to economic conditions. Saudi Arabia did not like the Washington pressure. A week later, China and Saudi Arabia released a joint statement committing to the stability of the oil markets. The following week, Saudi Arabia lowered the oil price for Asia while raising prices for Europe.

China signed $50 billion worth of new trade and security agreements with Saudi Arabia in December and over 20 new agreements with Iran in February. Along with more than a dozen countries, Saudi Arabia and Iran have applied to join the BRICS. Here is how I wrote about it in October.

Saudi Arabia and Iran are enemies actively fighting a proxy war in Yemen. It is improbable that the BRICS would accept Iran and Saudi Arabia. Still, it is almost a given that one will be accepted. In every way, Saudi Arabia would be more valuable to the BRICS. Saudi Arabia has more oil. It has the loyalties of the other OPEC nations. The Saudis have American weapons and routinely access American intelligence apparatuses. Suppose you were China and Russia building a basket of commodity-backed currencies to rival the Dollar. Would you choose Saudi Arabia or Iran? OPEC produces 35% of the global oil and is the bonus you get if you choose Saudi Arabia.

China must not have wanted an either/or situation. It must want both, and the only way for both nations to join the BRICS was a peace agreement. The BRICS will have three meetings later this year to discuss the application process and vote on applicants. However, after Iran's February summit in China, the state-run Iranian newspaper stated that Iran was now a member of the BRICS. The BRICS have not confirmed Iran’s assertion but have not denied it either. One week after the article and days after a joint naval exercise between BRICS members, Brazil allowed two Iranian naval warships to dock in Rio De Janeiro despite pressure from Washington to turn them away. The world should ask why China brokered an undisclosed peace deal between the two rival nations now.

All three countries benefit significantly from the deal. China is the largest oil purchaser of both countries. If Iran agreed to force the Houthis to sign a peace treaty in Yemen, Saudi Arabia would be removed from the conflict and the expense of protecting their oil fields so rigorously since 2015. Iran would have more avenues to evade U.S. sanctions by sending oil to other OPEC countries to resend with a new country of origin. China extends its political influence across OPEC and OPEC + for leverage against the U.S. and the Petrodollar system. 

It is the stated goal of the BRICS to overthrow the hegemony of the Dollar. The fact that Sunni and Shi'ite Muslims, who have been killing each other for more than a millennium, is open for business means their hatred of the U.S. is greater than their hatred for each other. If Saudi Arabia, Iran, and Egypt are accepted to the BRICS, it could be game over for the Dollar. China could turn off U.S. access to Middle Eastern oil like a faucet. Developments could get ugly fast. Someone should call the Fat Lady to tell her to warm up her voice, just in case.

The world is preparing for a significant de-dollarizing event. Are you?

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Ryan Watkins, Op-Ed ContributorbyRyan Watkins, Op-Ed Contributor
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