Who wins and loses when Saudi Arabia and Iran fight? The answer may surprise you!

U.S.-led peace talks to resolve the Syrian conflict are scheduled to start in Geneva, Switzerland, on 25 JAN 16. Iran is set to take part despite initial opposition to its inclusion by Saudi Arabia and the United States. Iran’s ability to influence the course of events in Syria and in the region, stemming from its effective use of the instruments of national power known as “DIME” (diplomacy, information, military, and economic), compelled the U.S. and Saudi to allow its participation.

However, the recent attack on the Saudi embassy in Iran has threatened to derail the peace talks. Yesterday, Saudi Arabia retaliated against Iran by breaking off diplomatic relationships with Tehran. Bahrain’s Sunni-led government did likewise, a move that is sure to anger its majority Shia population. Other Sunni-led Gulf states are expected to follow suit despite the unrest such moves will doubtless stir up among their Shia citizens.

If Saudi Arabia or any of the scheduled participants cancel their attendance at the talks, the ultimate losers will be U.S. State Department political appointees, who have been working hard for over three years to bring Middle Eastern nations together to end the Syrian conflict.

The ultimate winner will be Russia. But, paradoxically, Saudi Arabia and Iran will also be winners. Here’s why:

Late last year when Russia introduced military forces into Syria and began air strikes against ISIS forces in the region, it took a giant step toward achieving its historical and strategic goal of breaking free from its isolation in the Black Sea. By establishing itself in Syria, Russia has gained firm control of a warm-water outlet (Latakia) in the Mediterranean even as it places itself in a controlling position astride the oil and gas pipelines that feed Western Europe. As of today, Russia has occupied three major airfields in Syria as well, with 1,000 plus troops in each.

On 27 SEP 15 Iraq agreed to set up a cell to coordinate intelligence gathering with Russia, Syria, and Iran. In the same month, Saudi Arabia joined the cell after Russia and Iranian-backed troops expanded control over ISIS-held oil fields in Syria. Saudi Arabia, which reportedly has been supporting ISIS in Syria, thereby lost its supply point controls in Syria–a development threatens the health of the Saudi economy.  On 3 DEC 15 the Saudi intelligence chief met with Russia’s President Putin in Moscow. Their discussions were focused on the crisis in Syria and the Geneva peace conference. Their objective was to address the crisis in Syria in a way that would produce an outcome beneficial to Saudi Arabia, Russia, and Iran. Bottom line: for Russia to succeed, the U.S. will have to fail.

As for Saudi Arabia and Iran: the economic health of both countries is contingent upon the price of oil, and the higher the better–preferably above 30 USD per barrel. Since the beginning of the current Saudi-Iran crisis, oil has held steady at 36 USD per barrel. It is likely that the price will rise to 48 USD per barrel in the coming weeks and possibly to above 55 USD per barrel. With Russia buying the current overstock of oil from Saudi and Iran, all three nations stand to gain in this situation. Thus, it is to the advantage of all three nations to maintain a certain level of tension that will keep oil prices high and stable.

As this “crisis” between Saudi and Iran continues, both countries may realize political gains as well. Saudi Arabia will be able to assert itself as the leader of the Sunni states in the Middle East, displacing Turkey in that role while further marginalizing Egypt. By the same token, Iran will become the leader of the region’s Shia Muslims. Russia, which already enjoys friendly relations with Iran, has tried to develop a relationship with the Saudis. When visiting Russia, the Saudis have also indicated in their actions that they perceive that they have been abandoned by the U.S. since the latter concluded its economic/nuclear deal with Iran.

To repeat: If this scenario plays out, the United States will see its prestige and influence in the region plummet. Inevitably, it will sustain economic losses that will compel its re-engagement in the Middle East at some future date. Of course, this process of re-engagement will be all the more difficult since America, in a move that can be likened to cutting off its nose to spite its face, is actively withdrawing from the region.

However, the ultimate winner can be the United States if the U.S. changes its policies to support honest friends in the region.

The Iran nuclear deal’s economic effects on Iran will be felt in June 2016. However, Iran has already begun negotiating economic agreements with the EU aimed at freeing it from its dependency on U.S. markets. At the same time, Iran is using the Americans detained in Iran as leverage to minimize any economic losses it may incur prior to the June implementation of the nuclear deal.

For example, Iran is currently required to compensate the Americans held hostage in the 1980s through payouts which may amount to hundreds of millions of U.S. dollars. In addition to the hostages themselves, spouses and children of the hostages as well as 150 people associated with the embassy hostage ordeal are eligible for compensation. The payments and other similar penalties must be paid by Iran prior to the $100 billion in Iranian frozen assets being released in June 2016.

Given that Iran has already violated some of the parameters of its nuclear deal and has attacked the Saudi embassy in Iran, it is possible that Saudi and the rest of the OPEC nations, with the backing of the United States, will consider applying additional sanctions against Iran, which will offset Iran’s current oil revenue earnings.

Luckily for the United States, China’s economic slow-down has caused China’s market to drop at least 10 points. Although it is a short-term loss for the United States and the world economies, it comes at the right time for U.S strategic needs (if this drop continues for the short term). For Iran this will be a devastating blow because it will not receive payment from the oil it sold on illegal loans to China during the sanction years. China will have no ability to bail out Iran if further sanctions are placed upon it. This is due to Iran’s attack on the Saudi Arabian embassy and China’s inability to move Iranian money in the current economic circumstances.

These lost revenues, along with possible OPEC and Saudi sanctions backed up by the U.S. in the region, can place Iran in a critical economic and political hole with no relief in sight even after the June 2016 implementation of the nuclear deal. Iran may have to go to war in the region to protect its interests and current gains.

NEC-SE has predicted that if Turkey was marginalized in the region it would retaliate by expanding its footprint in northern Iraq. It did so recently. The only pushback this NATO member received in this regard came from Turkish tribal groups in the KRG and Kurdish organizations including the YPG and the PKK in Syria and Turkey.

If Turkey now sees the Saudis as taking the role of the protector of the Sunni Muslims from Iranian aggression, it is possible that Turkish forces may again enter northern Iraq as a military counter to Saudi leadership, placing them at odds with Iranian-backed military forces in the area. The result may be war between Turkey and Iran. Russian support of independent Kurdish movements in Eastern Turkey and Syria will provide Turkey with justification for its incursions into northern Iraq.

Egypt may also see itself deposed as the historical leader of Arab states in the region. If Turkey goes to war with Iran, if Saudi and the rest of the Arab states institute further sanctions against Iran, and/or  if the Iran nuclear-economic deal becomes too costly for Iran, then look for the possibility of Egypt intervening in the war in Syria over the next six months. This will position Egypt as a direct player in Syrian peace talks. Egypt may not have to wait until any of these scenarios come true.

If these scenarios play out, Russian forces could be driven from Syria before they have established their hold over Syria, northern Iraq, and other  Middle Eastern states – not because of their force capabilities, but because Russia will not be able to stabilize the region in the time-frame needed in order to support its other economic interests.

Eventually the Russian exit will be signaled by Russia first replacing  Syrian president Bashar Al Assad by another Syrian Alawite leader, and then by cutting its losses to ensure that it can sustain its global interests past 2018.

All in all, the first half of 2016 is shaping up to be one of the most chaotic years in the history of the region.

For the U.S to achieve successes in the region, it needs to have a military presence in the region to include possible basing in Lebanon, Jordan, Iraq, Kuwait, and other locations where it can tie into honest partners.

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Categories: Governance

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