Recent events in the Middle East have highlighted the longstanding rivalry that exists between Saudi Arabia and Iran. While often reduced to religious sectarianism, the animosity between these two countries is also a struggle for regional hegemony, both political and economic. Given the strategic importance of this region, moreover, the actions that take place on either side of the Persian Gulf can have a lasting effect on the global economy.
Historically, the Saudi-Iranian relationship has been marked by a religious disagreement dating back to the establishment of Islam in the 7th century. In recent decades, however, the political landscape in the region has exacerbated this bilateral antagonism, with each side endeavoring to undermine the other by continually supporting opposing proxies throughout the region. Both countries, for example, have provided support to warring sides in Syria and Yemen. Iran’s thorny relationship with the West has also fueled the animosity.
From a Western point of view, the Saudi-Iranian tussle is worth understanding given its economic implications. Both Saudi Arabia and Iran are major oil producing countries, and arguably the two most powerful OPEC members. While the Saudis enjoy a financially sturdier and dominant position in the oil industry, the lifting of international sanctions against Iran means Tehran will soon find itself able to resume crude oil exports, revitalizing its economy and reclaiming any ground lost to the Saudis. Iran’s newfound position troubles Saudi Arabia, as it directly interferes with Saudi designs for the region and the industry. In December, the Saudis reduced their asking price for oil, interpreted by many as a move to sabotage Iran and defend their market share. Moreover, the recent diplomatic crisis over the execution of a Shi’a cleric has further crippled OPEC’s unity, dimming any chance of a production cut in the near future. The most recent OPEC meeting failed to coordinate a reduction in output levels for its member states, despite the low prices. For the rest of the world, this means that the oil glut will continue, helping to drive oil prices lower.
In short, the rivalry between these two geopolitical archrivals—fueled by centuries of sectarian struggle and decades of political mistrust and economic competition— threatens to further destabilize an already volatile region. Undoubtedly, each side has undertaken to protect its turf and undercut the other at every turn. For the world, the main concern is the price paid at the pump. There is also a latent fear that an actual confrontation between these two oil heavyweights will disrupt crude oil production and the global economy.
Geovanny Vega
Historically, the Saudi-Iranian relationship has been marked by a religious disagreement dating back to the establishment of Islam in the 7th century. In recent decades, however, the political landscape in the region has exacerbated this bilateral antagonism, with each side endeavoring to undermine the other by continually supporting opposing proxies throughout the region. Both countries, for example, have provided support to warring sides in Syria and Yemen. Iran’s thorny relationship with the West has also fueled the animosity.
From a Western point of view, the Saudi-Iranian tussle is worth understanding given its economic implications. Both Saudi Arabia and Iran are major oil producing countries, and arguably the two most powerful OPEC members. While the Saudis enjoy a financially sturdier and dominant position in the oil industry, the lifting of international sanctions against Iran means Tehran will soon find itself able to resume crude oil exports, revitalizing its economy and reclaiming any ground lost to the Saudis. Iran’s newfound position troubles Saudi Arabia, as it directly interferes with Saudi designs for the region and the industry. In December, the Saudis reduced their asking price for oil, interpreted by many as a move to sabotage Iran and defend their market share. Moreover, the recent diplomatic crisis over the execution of a Shi’a cleric has further crippled OPEC’s unity, dimming any chance of a production cut in the near future. The most recent OPEC meeting failed to coordinate a reduction in output levels for its member states, despite the low prices. For the rest of the world, this means that the oil glut will continue, helping to drive oil prices lower.
In short, the rivalry between these two geopolitical archrivals—fueled by centuries of sectarian struggle and decades of political mistrust and economic competition— threatens to further destabilize an already volatile region. Undoubtedly, each side has undertaken to protect its turf and undercut the other at every turn. For the world, the main concern is the price paid at the pump. There is also a latent fear that an actual confrontation between these two oil heavyweights will disrupt crude oil production and the global economy.
Geovanny Vega
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