Iranian Endgame: Part II — The Saudi Dimension

The sanctions strategy that Western nations is enacting against Iran’s oil weath depends on more than just those Western nations. The interest (and actions) of the Gulf states and Asian nations also matters critically. Only East-West cohesion can seriously undermine Iran’s hydrocarbon economy. But getting the Saudis to wield such a brutal oil weapon to shoot down Persian nuclear plans will not be quick or easy given the stakes involved.

The al Saud are well aware of the other (more credible) hedges Iran has up its sleeve (beyond cutting off oil flows through the Strait of Hormuz). At the top of the list is stirring Shia schisms in Iraq, Bahrain, Syria, Lebanon and in Saudi Arabia itself.

The “Arab Awakening” is still sufficiently fresh in the minds of Gulf region leaders to set them on edge. Iran has dropped hints that it could have played much tougher with Riyadh over its intervention in Bahrain.

The degree to which Iran could cause trouble in Iraq is not a question many Sunni leaders want to test either — nor leaders in Washington. Further deterioration in Iraq would hammer U.S. credibility in the Gulf region. It would also have a sharp resonance for Allied operations in Afghanistan.

A second option, although massively inflammatory, is for Iran to strike key Saudi oil infrastructure. Tehran’s missiles could reach the Abqaiq processing facility, which produces five to six million barrels of oil per day. Or it could hit loading facilities at Ras Tanura. That would be hugely disruptive to Saudi Arabia, but arguably less so to Iran (at least in the very short term) assuming Hormuz remained open.

A third ploy could conceivably involve a limited closure of the Strait through a well-planned and clearly communicated Iranian military exercise. Not sufficient for a Western casus belli, but enough to spook global oil prices.

Of the three “options,” Iran will obviously go for the slow Shia burn long before it gets drawn into strategic power plays. These are all considerations that will weigh heavily on Saudi minds. But in the final analysis, they probably remain secondary concerns compared to an Iranian nuclear capability.

It is this primary fear (rather than external posturing) that the West should focus on to get the Saudis to consider withholding oil from global markets. That’s not as a prelude to war — not in any way — but with a view to a far more constructive move: getting China’s attention to actually give sanctions a credible chance of working.

“Business as usual” won’t do that as long as Riyadh keeps filling the gaps, but a threatened Saudi oil “embargo” undoubtedly would. At the end of the day, China’s key supply relationship in the Middle East is heavily anchored in the Gulf states. Of the 5.5 million or so barrels of oil per day that China imported in 2011, 2.3 million were sourced from Saudi Arabia, Iraq, the UAE and Kuwait — with Iran accounting for only 550,000 barrels.

Any way you look at it, China knows that Arab output will always trump Persian production. “Chirabia” — rather than “Chiran” — is the key relationship Beijing needs to get right. China’s overriding energy interests are secular stability and steady supplies to fuel the Chinese economy and to keep benchmark prices within a “stable range.”

If China’s core suppliers in the Gulf call time on Iranian nuclear ambitions, expect Beijing (and thus India, the junior Chindia partner) to comply accordingly. They would either exert serious diplomatic pressure on Iran to change course, or sever all oil ties.

Political pieces would then be sufficiently in place to push for UN sanctions if still needed. Even the notoriously stubborn Russian veto might falter once the Kremlin saw which way the wind was blowing. It would certainly make a refreshing change from the “Moscow is a very reliable producer” line currently being spun.

Running the gauntlet

This would all come with considerable risks. Getting China to tighten the Iranian noose via Saudi rope — although economically painful — would raise the geopolitical stakes, and massively so. If Iran can no longer rely on Asia for oil receipts, expect Tehran to get nervous. Any one of the three scenarios sketched above, or a combination of them, could easily play out.

Hence, the problem with orchestrating a serious sanctions policy is that it could rapidly escalate to war if Iran lashes out. Conversely, if Iran dug in deep and decided to sweat it out, eventual pressures of sustained higher oil prices could force a major climb down across consumer states.

Not only would consumers be defeated by their own “embargo,” Iran could claim a political victory, picking up its nuclear pieces. Little real progress would be made. Even if power changed hands amid the carnage, Tehran’s nuclear line would remain largely the same. Regime change is not at the root of the problem, or indeed the solution.

The optimal outcome, of course, is that economic sanctions encourage Iran to change tack, deciding that the economic and political downsides of its pursuit of nuclear weapons are too great. This is extremely unlikely to happen, however. But sanctions might at least produce enough economic pressure to force open diplomatic channels and increase the possibility of a negotiated position that all sides could (at least for now) live with.

Hopelessly naive, you say? Possibly. But the costs of not going down the sanctions road are actually quite high for China. The further Iran inches towards its nuclear endgame, the more likely it becomes that one of the players involved will make a rash move.

If we translate this into security terms, Beijing has to become a credible provider — not just a consummate consumer — of geopolitical stability if it wants its energy supplies to consistently pan out. China has been too busy keeping its global energy options open under the cover of U.S. security for far too long. Eventually something has to give. A tough choice between Saudi and Iranian oil could help focus Chinese minds should Beijing fail to wield any serious influence on Tehran’s desire for nukes.

Highest game, highest stakes

To be fair to Beijing, a serious discussion between the U.S. and China would help. The key question they should take up is who should be doing the geopolitically heavy lifting — and for what and where — across the “G2.” Iraq massively reduced the United States’ stock in the Middle East, much as Libya raised questions about U.S. resolve. Put into the mix the United States’ desire for “energy independence” and it is abundantly clear that there is a vacuum to be filled.

Instead of fighting China tooth and nail for geopolitical primacy in the Asia-Pacific region, the United States should bring China into the international security fold: a shared division of geopolitical labor in the Middle East — through Beijing’s nascent “String of Pearls” policy — would be a good place to start. Leaving G2 relations to chance in the Middle East is a risky game for all concerned, particularly as the Saudi-Iran relationship blatantly sits at the heart of U.S.-China relations (at least as currently configured).

Should the Iranian situation spiral out of control, the United States will act, irrespective of the fiscal damage that may be inflicted on the U.S. economy. China would see this as a last-ditch power play by Washington to secure its place in the region, albeit with the rich irony that Beijing would ultimately be the (indirect) bankroller of the effort.

Where all this leaves Europe is a different question. No one expects the EU to be a serious geopolitical actor anytime soon (beyond bilateral forays from London and Paris). But in this high-stakes game, Europe needs to be very careful as to how far it stretches its credibility.

The core task for now is to make sure its sanctions actually work so that bigger international forces can come into play and give sanctions a serious chance. Even if a broader sanctions policy works out, the prospects for war remain just as likely (if not more so) as they do for a negotiated peace.

Bottom line: if the EU can’t live with a war scenario, it should discretely pose the nuclear question to all concerned, and do so soon: Is living with a nuclear Iran, though unpalatable, a better option than playing Russian roulette with world peace? Depending on the answer to that question in Riyadh and Beijing, Washington and Tel Aviv would at least be wise to consider the response. Someone always has to play the dove — and most would expect the EU to do so.

The reality is that no truly good policy options exist. It is merely a case of picking the least worse. Whatever decisions are ultimately made, we can only hope they are done so in an orderly manner, on a global basis, and by seriously weighing all the relative costs and risks.

Editor’s note: Part I of this article can be found here.

The views and opinions expressed in this article are solely the author’s and do not necessarily reflect the views of the Clingendael International Energy Programme or its staff.