Threats to Grand Plans Sent Saudi Prince to Seek Iran Deal

Whether fixing ties with Iran or reaching out to Israel, Mohammed bin Salman has one top priority: ensuring his multi-trillion-dollar vision to transform Saudi Arabia stays on track.

(Bloomberg) — Whether fixing ties with Iran or reaching out to Israel, Mohammed bin Salman has one top priority: ensuring his multi-trillion-dollar vision to transform Saudi Arabia stays on track. 

Yet the crown prince’s plans to remodel his kingdom’s economy, society and its place in the world all rest on stability. And that’s driving his efforts to shield his country from any possible escalation in Israel’s confrontation with Iran, according to people with knowledge of Saudi Arabia’s formal talks with Iran, which started two years ago.

Saudi Arabia’s decision to restore diplomatic ties with Iran — a deal brokered by China and announced out of the blue last week — was the result of a calculation by the kingdom’s de-facto ruler that smoothing relations is the best way to achieve that aim. The move is designed to help offset security risks, especially those emanating from concerns that Israel’s new government may be preparing to attack Iran over its nuclear work.

“The kingdom has huge projects and big investments and does not want escalation in the region,” said Hesham Alghannam, a Saudi international relations expert who has been involved over the past six years in back-channel talks with the Iranians, also known as track 2 diplomacy.  

Crown Prince Mohammed’s willingness to act to secure stability, even sidelining the US in favor of China, underscores Saudi Arabia’s growing clout globally. 

The major oil exporter has become an even greater force in global energy markets since Russia’s invasion of Ukraine, which triggered a rush for alternative fossil-fuel sources and pushed up the price of crude. State-controlled oil giant Saudi Aramco reported a $161 billion profit for 2022 — the largest ever by an oil and gas company — and the kingdom was the fastest growing major economy last year. 

The crown prince wants to use those profits to diversify away from oil and catapult the kingdom into the ranks of the world’s top 15 economies. The sovereign Public Investment Fund is pouring in hundreds of billions of dollars to turn the country into a major tourist and foreign-investment destination. 

Yet all that could come to a halt if a new war in the Middle East gets in the way, prompting Prince Mohammed to approach both the US and China for assistance. 

In October and November, the crown prince and senior Saudi officials told several prominent Jewish Americans who have the ear of leaders in Washington and Jerusalem that Saudi Arabia was ready to normalize ties with Israel. The provision was that the US give Riyadh iron-clad defense and security commitments, guarantees regarding future arms supplies and help to develop a civilian nuclear program.

Those “big asks” were rebuffed by Washington, John Hannah, from the Jewish Institute for National Security of America, said in an interview. Making peace with Israel was further complicated by the worsening violence between Israelis and Palestinians that accompanied Prime Minister Benjamin Netanyahu’s return to power.

The US State Department and the US Embassy in Riyadh did not respond to requests for comment. 

China Pivot

Prince Mohammed then turned to China, hosting President Xi Jinping for a major summit in mid-December. It was the Chinese leader who offered to bridge differences between Saudi Arabia and Iran, according to a Saudi official, mending ties severed in 2016 after protesters attacked Riyadh’s embassy in Tehran.

After the Chinese told Saudi Arabia that Iran accepted its proposals for resumption of relations, a national security delegation flew from Riyadh to Beijing last week to hold secret talks with their Iranian counterparts, added the official.

The Chinese Foreign Ministry did not immediately respond to a request to comment.

Saudi Arabia then surprised everyone by signing an agreement to restore ties, with the Chinese effectively being the guarantors.

The deal should be viewed as an insurance policy, and a way for Saudi Arabia to convey a strong message to Iran that “we aren’t involved in anything that may happen and no harm will befall Iran from the Saudi side” in case Tehran is attacked by Israel, said Alghannam, the Saudi expert.

One immediate priority for the Saudis is to use the détente to renew a truce in neighboring Yemen, where a Saudi-led coalition intervened in 2015 after the Iranian-backed Houthi rebels took over the capital Sana’a. The conflict has killed about 233,000 people and triggered missile and drone attacks on Saudi Arabia, including a major drone assault on Saudi oil facilities in 2019 which was blamed on Iran. 

While the US remains Saudi Arabia’s main defense and security partner and the number one provider of military technology, the Saudis have grown increasingly less confident that the US will have their back in the event they come under attack.

They are instead betting that China, as their own largest trading partner and main buyer of Iranian crude, has greater leverage, said Mark Dubowitz, the head of the Foundation for Defense of Democracies, a Washington think tank close to Israel. He met with Prince Mohammed and other Saudi officials during multiple trips to the kingdom.

Seen from Riyadh, Beijing would be able to lean on Iran in the event of any flareup in the region, either coming from Yemen or any military action by the US or Israel against Iran, he said.

“It’s motivated by a deep sense of fear and an assessment of risks to the domestic transformation,” said Dubowitz. In his view, a Saudi de-escalation with Tehran doesn’t change the mistrust and “visceral hatred” toward Iran that the crown prince expressed during their meetings, he said.

 

While the US still remains pivotal to the crown prince’s plans — Saudi Arabia just signed a $37-billion-dollar contract with Boeing Co. to buy jetliners for the newly launched Riyadh Air — turning to China as a major diplomatic partner is an important shift.

President Joe Biden, who vowed during a presidential debate in 2019 to turn Saudi Arabia into a pariah over the killing of Washington Post columnist Jamal Khashoggi, tried to reset ties when he visited Riyadh in July. But an OPEC+ oil production cut in October and the sentencing of a US-Saudi citizen to 19 years in jail for critical tweets have soured relations once again.

The way Saudi Arabia orchestrated the Iran announcement, the secrecy that shrouded it and the mixed signals about the possibility of normalization with Israel further point to an increasingly assertive foreign policy guided first and foremost by national interest.

“This is a different Saudi Arabia,” said Karen Young, senior researcher at Columbia University’s Center on Global Energy Policy. “I can’t imagine this under prior leadership, this many balls in the air at the same time and at really high level.”

–With assistance from Fiona MacDonald and Matthew Martin.

More stories like this are available on bloomberg.com

©2023 Bloomberg L.P.