For well over the past four decades, Iran and Saudi Arabia, the two Middle Eastern heavyweights, have been at odds. Simmering geopolitical tensions have unraveled into proxy wars, with both parties backing militant groups in geopolitically weaker nations throughout the MENA region. While this high-stakes rivalry serves up the enticing prospect of ideological dominance in the Arab World, its intensification— and the highly plausible involvement of a third belligerent in Turkey—could have detrimental impacts on an already volatile Middle East, and further disrupt the global political and economic landscape.
Origins of the conflict—and why it persists
Hostilities between the two nations escalated after the 1979 Iranian Revolution, when a coup spearheaded by the populist Shia cleric Ayatollah Khomeini closed the doors on nearly three decades of Western-backed rule under Mohammad Reza Shah. Khomeini completely transformed Iranian politics, replacing “Westernization” under the Shah with a theocratic system antagonistic to foreign influence, and adopting populist “pro-poor” policies. Khomeini’s agenda also aimed to propagate the Islamic revolution to neighboring states, infuriating Saudi Arabia, which wanted to maintain a successful monarchy.
This fear of ideological upheaval has persisted, with both nations laying claim to being the true standard- bearer of Islam. While Sunni Saudi Arabia argues that their guardianship of the holy Mecca and Medina gives them this title, Iran’s Shia, anti-Western style has been branded as the ideal embodiment of Islamic leadership. A deeper analysis reveals that Saudi Arabia fears religious encirclement. This can be attributed to the “Shiite Crescent”, a region of influence with Shia-majority populations. This Shiite “axis of influence”, which consists of Bahrain, Iran, Iraq, Syria, Lebanon, and Yemen, was established under slain military commander Qassem Soleimani, who consolidated Iranian influence over these nations through an amalgamation of military intervention and strategic alliances. Riyadh has perceived this as a veiled form of Iranian post-Revolution expansionism, deeming it a move to orchestrate a “regime change.”
This paranoia is interlaced with domestic politics in the region: Riyadh has magnified the threat of Iran to foster a faux sense of national danger. This gambit—rallying the public behind the prospect of neutralizing an external, seemingly anti-Sunni enemy—is probably intended to deflect attention away from poor domestic governance, ranging from an unstable oil-reliant economy hit by Covid-19, to a less-than-ideal human rights record. Therefore, one can understand that détente has not been reached owing to a
combination of political and ideological factors, with both parties exploiting the sectarian divide to keep the conflict alive.
A third in the mix
Enter: Turkey. Led by staunchly right-wing President Recep Tayyip Erdoğan, what was originally a secular nation open to globalization is now morphing into a highly pan-Islamist, anti-Western state. What is alarming about Erdoğan’s leadership is a newly developed foreign policy playbook: the evidence indicates that Ankara has expansionist designs in the Greater Middle East. This largely mirrors Turkey’s “Neo- Ottoman” foreign policy, which aims to geopolitically reintegrate regions formerly under the Ottoman Empire, such as those in Northern Africa, the Mediterranean, the Middle East, and the Balkans, with Turkey. Although Ankara has categorically denied pursuing Neo-Ottomanism, military interventions in Greece, Iraq, Syria, and even Libya demonstrate otherwise. A noteworthy instance of this aggressive foreign policy is Erdoğan’s militarization of North-Western Syria in 2019, to counter the YPG (Kurdish People Protection Units), a militant group fighting ISIS. As a result, Ankara now controls large areas of land throughout Northern Syria, where the Turkish lira is the currency.
Ankara’s motives for pursuing Neo-Ottomanism in the Middle East are also clear. The policy’s sentimental appeal could help Erdoğan muster domestic support, especially factoring in a loss of support from the vox populi, owing largely to a depressed domestic economy. Erdoğan’s plummeting support was emphatically substantiated by the results of the Istanbul Mayoral Elections in 2019, where Erdoğan’s AKP (Justice and Development Party) was annihilated. Another important dimension to consider is that Ankara is likely to
view an unstable and politically precarious Middle East as a region where it is possible to gain more influence. Erdoğan will thereby look to replicate Turkey’s prior Mediterranean success in the Middle East, by propagating pan-Islamist ideals and settling scores with Saudi Arabia to establish itself as the superior Sunni power.
Further, even though Ankara has consistently projected a spirit of diplomacy and goodwill, it has blatantly pursued its own interests. For instance, although Turkey welcomed the Gulf Reconciliation Agreement, it has relentlessly continued military expansion in Iraq and Syria. This could have adverse implications for stability in an already volatile region, with three hegemony-thirsty powers looking to further their spheres of influence in key battlegrounds such as Syria and Iraq. In addition, carrying on this “Neo-Ottoman” expansionist policy has not been viewed favorably by Iran. Recently, for instance, Iran strongly condemned Turkish attacks on Iranian military advisory bases in the Idlib region of Syria. This could sever close economic ties between Turkey and Iran, diminishing Turkey’s historic role as an “economic backup channel” for Iran, and disrupting flourishing bilateral trade that has benefitted both nations immensely.
What this means for global economies
Rapprochement is the need of the hour in this dynamically evolving conflict and can be facilitated by a perennial mediator in the United States under President Joe Biden. Biden has adopted a less hardline approach towards Iran than his predecessor, pushing for the re-activation of the 2015 Iranian Nuclear Deal. The United States also engaged in rare talks with both Iran and Saudi Arabia, reportedly discussing the de- escalation of the conflict in Yemen, among other issues. However, while concerted efforts by the Biden administration may temporarily help alleviate tensions, any hope for long-term rapprochement will need to factor in the intentions of Turkey. The implications of this potentially three-way conflict are significant.
First, from an economic standpoint, this conflict has the potential to drive up oil prices, which will impact a highly interconnected global economy. Iran may have grandiose ambitions for increasing influence in the oil-rich Eastern part of Saudi Arabia, which is dominated by a Shia minority critical of the Saudi monarchy, stemming from the 2016 execution of Shia opposition leader Nimr al-Nimr. This, coupled with likely Turkish interests in the oil-wealthy Iraq, will cause widespread military escalation, driving down oil supply and increasing prices. Asia—which imports 66% of its oil from the Middle East—would be immediately hit, followed by spillover effects worldwide, particularly disrupting sectors such as manufacturing, transportation, and utilities.
Second, the impact of these conflicts on Saudi Arabia’s sovereign Public Investment Fund (PIF) could be egregious. The wealth fund has funded global icons such as Uber and Reliance, helping achieve both reduced Saudi reliance on oil and increased globalization. However, owing to the political risk associated with a nation entrenched in a military conflict, companies might look towards other nations for investment. This imperils a key avenue for economic integration and diversification and could reduce Riyadh’s “Vision 2030” goals to a mere pipe dream.
To conclude, settling this conflict is of interest to nations in Asia and beyond. With what could spiral into multiple hegemony-seeking powers vying for dominance, leaders need to acknowledge the conflict’s possible implications on economies, globalization, and geopolitics, and lay the groundwork for establishing a long-term peace.
