Regional relations: GCC-Iran:

Relations between the two shores of the Gulf were contentious even before the advent of the Islamic Republic. In the 1950s and ‘60s, British and American presence in the region moderated the ambitions of both the Shah’s Iran and Saudi Arabia from dominating the smaller Arab Gulf states. However, with the departure of the British from the Gulf in 1971 Saudi-Iranian ties became marred by conflicts. Iranian-Saudi rivalry centred on bids for regional dominance, occasional disputes over the Iranian occupation of the Emirates Islands in November 1971, before the formation of the United Arab Emirates Federation (UAE) in December 1971, Iranian pilgrimage to Mecca and Medina, Bahrain’s independence, which Iran then claimed to be its ‘14th province’ or, more generally, the rivalry between the two powerhouses.[1]

Although hegemonic power competition and regional rivalry were a familiar feature of Gulf politics during the reign of the Shah, the 1979 Islamic Revolution amplified the tensions between Iran and Saudi Arabia. The declared intention of Iran to export its version of the Islamic revolution’ and its questioning of the legitimacy of the existing Arab Gulf monarchical system added further complications to its relations with the GCC states. Hence, the advent of the Islamic Republic was viewed with suspicion by the oil-rich Arab Gulf states. Apart from Oman, which carved for itself special relations with Tehran, the GCC states developed anti-Iranian foreign policies aimed at protecting their systems from the tied of the Islamic revolution. This was demonstrated in particular by their support of Iraq in its war with Iran (1980-1988) in an effort to check the perceived threat emanating from Iran.

With the goal of balancing Iran’s threat and enhancing their own security, the Gulf States also moved to create their own regional organization, the Gulf Cooperation Council (GCC), excluding other countries in the region such as Iraq, Iran and Yemen. Since then, and throughout the 1980s, relations between the exclusively monarchic club of the GCC on the one hand, and revolutionary Iran on the other, underwent different stages. In most cases it was marred by misunderstandings and disagreement if not outright competition and antagonism. Although there were periods of a possible rapprochement during the Khatami era (1997-2005), in recent times this has ended in an overt and open conflict – especially between Iran and Saudi Arabia, which acts as a leader of the GCC bloc. Tension between the two countries has never been as alarming as today, when they have been locked in an intense zero-sum game rivalry.[2]

The peak in Iran-GCC tensions started with the United States invasion of Iraq and the fall of Saddam Hussain’s regime (2003). Despite Iraq’s various conflicts with several GCC states and even its invasion of one of its member states (Kuwait, 1990), the country was viewed as a counterpart to balance against Iranian power. The disappearance of Saddam and his Baath regime from the regional political scene added to the deterioration of the relations between Iran and the GCC states, unleashing sectarian tensions.[3] The elected Shia-led government of Nouri al-Maliki in Baghdad was viewed by the GCC states as being a puppet government that was controlled by Iran. Until very recently, the GCC (apart from Oman) refrained from establishing diplomatic relations with Iraq and from supporting its elected government. From a GCC perspective, Iran was seen as controlling an Arab capital (Baghdad) that once was the 'Eastern Gate' of Arabia. The weakening of the Arab regional system that began well before the Arab Spring, added to the deterioration of Iran-GCC ties, as it made the GCC states feel more vulnerable and exposed to perceived Iranian influence and intervention in Arab politics. Iranian rhetoric and claims of controlling ‘four Arab capitals’ (Baghdad, Damascus, Beirut and Sana’a), as well as its support for certain Shia groups across the region, further deteriorated GCC-Iran relations. This invariably led to the exacerbation of Sunni-Shia tensions and spurred a proxy-war element to the region’s conflicts. In an effort to push back the perceived Iranian influence in the Arab world, the Arab Gulf states found themselves supporting Sunni groups in Iraq against an exclusionary Shia-led government supported by Iran. In Syria, Iran supports the Alawite-dominated regime of Bashar al-Assad against a popular uprising of its mainly Sunni population, which is supported by the GCC. In Lebanon, Iran supports Hizbullah, a party that operates outside the control of the Lebanese central government, has much influence on the country’s internal politics including the current disagreement over the presidential elections, and has been involved in regional military conflicts with Israel and in supporting the Assad regime in Syria. The GCC states, on the other hand, support the Lebanese government and view Hizbullah and Iran’s policies as inimical to their interest in ensuring security and stability of Lebanon. Iran is also accused by the GCC states to have supported the Houthis-led takeover of power in Yemen. Fearing the negative consequences of instability in Yemen and dreading the rise of the Houthis to form a strong party in Yemen with perceived strong links with Iran, similar to Hizbullah in Lebanon, the GCC states with other coalition member states, led by Saudi Arabia started their military intervention (Decisive Storm) in March 2015.

Moreover, Iran's clandestine nuclear program did not only raise the concerns of the GCC states, but also added more to underlying regional tensions fuelled by growing suspicion of Iran’s regional hegemonic ambitions and its growing unconventional military capabilities. Despite international sanctions, Iran was able to develop a ballistic missile system, and increase its unconventional asymmetrical capabilities through its Islamic Revolutionary Guards Corps (IRGC).[4] The GCC states were concerned that a nuclear-armed Iran would create a regional military imbalance and started enhancing their military capabilities through an expensive arms race. An added concern for the GCC states, provoked by the Iran’s nuclear program, was the environmental effects of Iran’s nuclear plants, given the geographical proximity to the Arab Gulf states. That is why the GCC states have not only called for a nuclear-free zone in the Gulf and the wider Middle East, but also supported the sanction policies targeting Iran’s nuclear program. According to WikiLeaks some GCC states showed their willingness to support US military attacks against Iranian nuclear installations.[5]

The rising concerns of the GCC states about Iran’s power in the region seems understandable given the fact that the Arab Spring, which erupted across the Arab world, concurrently added to the already existing vulnerabilities of the GCC caused by (perceived) threats from Iran. The waves of the Arab Spring toppled two very important allies for the Gulf states, namely the regimes of Husni Mubarak in Egypt and Ben Ali in Tunisia, and threatened other Arab regimes including some of the Gulf states themselves -Bahrain and Oman in particular. The result was a further weakening of the Arab regional system and a deteriorating security environment of the GCC states. Badly shaken by the Arab Spring and its consequences, the GCC states engaged in a counter-revolution to stem the tide of the Arab Spring and to create a resemblance of stability to the Arab regional system that suits them. In this context, the GCC Peninsula Shield Force entered Bahrain (March 2011) to support its monarchy against the mainly Shia-led uprising, believed to be supported by Iran. The GCC also offered financial aid to both Bahrain and Oman to help stabilize their economies and meet the growing popular demands of their restful youth. In the same milieu, the GCC states, mainly Bahrain, Kuwait, Saudi Arabia and the UAE supported, the military coup in Egypt against the democratically elected Morsi (Muslim Brotherhood) government. In fact Kuwait, Saudi Arabia and the UAE provided substantial economic, financial and political support to the Sisi military regime and continue to do so in an effort to stabilize Egypt as an Arab country with heavy political weight in the Middle East. This however has caused tension within the GCC framework where Qatar was supporting the toppled Morsi government. Three GCC states, Bahrain, Saudi Arabia and the UAE, went as far as withdrawing their ambassadors from Doha and despite the restoration of ties, the tension over Egypt continues behind the scenes.

GCC States external relations:

The external relations of the Gulf GCC states has been largely determined by their past colonial history, great powers rivalry and regional competition in the region and realpolitik.[6] Until the British withdrawal from the East of Suez in late 1960s, Britain almost exclusively controlled the small Gulf States foreign relations. The 'Pax Americana' that replaced the waning 'Pax Britannica' engulfed the region within the Cold War strategy over several decades and through several policies, preventing global powers from gaining access to the rich oil region of the Gulf. Although Gulf GCC states became independent after the British withdrawal and started to develop their own foreign policies and external relations, they had to take onboard the US, the new hegemon and security guarantor, sensitives and policy preferences when it came to conducting their foreign relations. Relations with the West (US and Europe) continued to be their main priorities especially as energy and economic relations started to cement the existing security relations.

These small and vulnerable Gulf GCC states became ever more dependent on the US/Western security umbrella and guarantee. This is more so given the geostrategic location of these states in a conflict ridden area and surrounded by larger and more populace countries like Iran and Iraq. While under western security shield, Gulf GCC states were also engaged in an unrelenting regional Omni balancing game between the main countries in the region. At the top of their priority is the security of the monarchial regime system and their wealthy states from would be predators. The US invasion of Iraq in 2003 complicated their balancing game between Iran and Iraq as the former started to dominate the latter and was viewed by the Gulf GCC states as an unwelcome consequence of misguided and misadventures US policy.

As the Gulf GCC states became more confident with decades long of state building and economic prosperity propelled by their hydrocarbon wealth, they began to expand their external relations helped in no small way by the end of the Cold War and the bipolar world system. Not only did they create their own regional organization, Cooperation Council for the Arab Gulf States (GCC) in early 1980s, with the aim of securing their region and integrating their economies, but they started to develop wide-ranging external relations at both the bilateral and the collective levels.

Their hydrocarbon wealth and windfall revenues, especially since the year 2000, enabled the GCC states to come from the cold and to become important actors at the regional and international levels. Increasing hydrocarbon revenues have enabled what were once subsistent economies to become ones of the most important regional economies with unpresented economic growth and large financial surplus. In fact these small states have started to assume international economic leadership and have been called upon to shore up the international financial system.

This change in the fortune of the Gulf GCC states made them more active and assertive players at the regional and international levels and it also coincided with a dynamic shift in the in the global system. Over the last two decades, global economic power has shifted to Asia. China rise has been nothing short of remarkable and the same can be said, to the same extent, about India. Economic growth in Asia also shifted energy demand as energy consumption increased to fuel this growth. With less hydrocarbon demand emanating from the stagnant Western economies due to low economic growth and the availability of alternative energy, Gulf energy supplies found new markets in growing Asian economies. Trade and investment also followed suit where Gulf-Asia trade has been increasing bringing with it more political dialogue and future security cooperation. With Europe still recovering from its long economic malaise and the US ambivalent policy towards the region and its new reorientation and pivot towards Asia, these Gulf GCC states are diversifying not only their economic and energy relations but also their political and potentially security relations.

US ambivalence amid regional dynamics:

Several factors changed Gulf regional dynamics. Since the United States (US) "Pax Americana" replaced the British "Pax Britannica" as the new hegemonic power and the main security guarantor of the Gulf in 1970s, there have been some undercurrents shifts at the global and regional systems. This includes; the overthrow of the Shah by the Islamic Revolution in Iran in late 1970s, the Soviet invasion of Afghanistan in 1979 the Iran- Iraq War (1980-1988), which led to the creation of the Gulf Cooperation Council (GCC) in 1981, the Iraqi invasion of Kuwait (1990) and the subsequent liberation by Operation Desert Shield and Operation Desert Storm (1991), the formal end of the Cold war in 1990, the fall of the Soviet Union in 1991, the Treaty on European Union (Maastricht Treaty) which took effect in 1993, September 11 events in 2001 and the consequent US invasion of Afghanistan and its 'war on terror', policy, the invasion of Iraq and the downfall of Saddam Hussain's regime (2003), the Arab Spring (2011) as well as a number of global energy and financial crisis. During this turmoil period, relations between the GCC and the West (US and the Europe) were challenged and tested but remained intact due to the interdependency and the mutual interest in energy, economic, and security cooperation. However, more recent shifts in the regional/global geopolitics and its changing dynamics has shaken the long-lasted cooperative relations between the two sides and created new dimension in the Gulf relations with the West and Asia.

First, the US foreign policy is pivoting toward East, which consequently gives the impression that US commitment to the Gulf region is waning. Plus, the Shale boom in the US allowed the country to become less dependent on the Gulf oil and gas, which will have a substantial implications on the energy trade volume between the US and the GCC states. In addition, the US has begun to have different opinions on the critical issues in the Middle East and North African (MENA) region in opposite contrast to the Gulf GCC states. Starting from the Arab Spring, the crisis in Iraq, Syria, and Yemen to the latest issue of the US-Iran nuclear deal, the two parties are increasingly growing apart. In the particular case of the US-Iran nuclear deal, it was close to be considered as a betrayer from the perspective of the Gulf GCC states given the strong sense of rivalries between the Gulf states and Iran especially based on the Sunni-Shia sectarian tension. The Syrian crisis is another major issue that has weakened the bond between the US and the GCC states. On the six Gulf States’ side, the continuing survival of the Assad regime becomes a source of instability which can have a dangerous spillover effect in neighboring countries such as Lebanon, Jordan, and Iraq. Accordingly, the Arab Gulf countries supported the opposition movement and called for the lifting of the arms embargo which prevented necessary outside arms support from being delivered to the people on the ground. Meanwhile, the US has resisted calls for the lifting of the arms embargo and even vetoed the possibility of supplying adequate weaponry to the rebel forces. Although the threat from the self-declared Islamic state has somewhat converged their interests, the gap remains large and there is growing mistrust between the two sides encouraging the Gulf GCC states to seek future realignments driven by their need for security and vitalized by their more fortuitous economic power. The election of Donald Trump as a Republican President is marred by much uncertainty as to what would be the US future policy in the region.

Energy is at the heart of the Gulf GCC states' foreign and economic policy:

The Gulf GCC states core foreign policy goal is regime security, which conflates with state interest. Regime security is the paradigm through which policy is defined and the prism through which events are analyzed, and at the top is how they will affect the future of the ruling family. For the Gulf GCC states, the objectives of survival and security have required neutrality, secret diplomacy, reliance upon international powers and international legal norms and negotiation, and attempts to balance protection by the main great power with channels to others; these foreign policy calculations and means also always had to be conceived as part of the wider omni balancing strategy that takes in the domestic, regional and global challenges and economic resources.

Economic security and economic well-being stands at the core of Gulf States foreign policy making. Since the 1970s, Gulf States economies have witnessed enormous growth thanks in a large way to their hydrocarbon resources and the rise in oil price especially since the last decade. Although oil prices have recently fallen due to oversupply and competition from non-traditional energy, oil windfall revenues have made considerable contribution to the growth of their economies.

Over the last decades, the Gulf GCC states have been witnessing rapid economic growth with the value of their combined economy reaching $1.6 trillion by 2013, making it the 12th largest world economy and the largest in the Middle East and North Africa (MENA) region.[7] With pouring oil income beyond their economic absorptive capacity, they accumulated financial surpluses in Sovereign Wealth Fund (SWFs) touching $2 trillion, or around a third of total assets accumulated by SWFs worldwide.[8] Their investments have become increasingly global in terms of geographical spread and sectoral diversification awarding them a regional and global status where they have been frequently called upon by international organizations like the International Monterey Fund (IMF) to contribute a raising share into economic stabilization and rebuilding packages for European and North American economies. Their roles ranged from reshaping the global financial architecture in the aftermath of the 2007–8 crisis to greater involvement in South-South networks and debates over the international politics of climate change.[9]

This rise of the Gulf GCC states is happening within a rapidly globalized multipolar system in which power is more diffuse and increasingly refracted through overlapping layers of national, regional, and global governance.[10] At its heart lies a global rebalancing of geopolitical and geo-economics power from West to East centering around the pivotal commercial and strategic position of the oil-rich GCC states of the Arabian Peninsula.

In addition and as a direct consequence of oil wealth, these Gulf GCC states have become an increasingly important node in global trade exchange and with $1.42 trillion worth of trade in 2013, they ranked fifth in the world.[11] This trade volume is broken down into; US $921 billion worth of exports, making them the world’s fourth largest exporter after China, the US and Germany, and $514 billion worth of imports where they ranked the tenth globally. Most of their exports consists of crude oil, gas, and petrochemical derivatives and they import all kind of manufactured goods and technology for their developing economies. These figures indicate the significance of their economies and markets which makes them an attractive trade and investment partners offering them economic bargaining power and more political confidence. The Gulf region is thus internationalizing rapidly and emerging as the center of gravity in West Asia by virtue of its hydrocarbon reserves and production, trade opportunity and financial resources.

However, despite many years of economic diversification attempts, the GCC states economic structure is largely driven by hydrocarbon exports.[12] Oil and Gas sector contributes 63 per cent of the public revenues for these countries or 41 per cent of their GDP and over 70 per cent of their total export revenues. Given their level of oil and gas reserves (30 per cent and 15 percent respectively) and their global oil and gas production (40 percent and 15 percent respectively).[13] It will be no great surprise if the GCC States' strategic relations are becoming increasingly responsive to the global shifts and more aligned to the emerging changes in the energy markets and especially energy demand emanating from Asia. Their future economic depends heavily on energy demands and how their trade and investment relations with each world region advance. They have become more increasingly diverse in terms of external trade and investment relations as part of their economic diversification and political survival strategy. From the historically dominant US and the EU to the emerging markets, the GCC’s external relationships are incessantly shifting as a result of internal growth dynamics and global headwinds.[14]

Global change dynamics: the rise of Asia and GCC-Asia relations

Since the turn of the millennium, the global economy has undeniably been undergoing a profound and momentous transformation and as a consequence the center of global economic activity is shifting eastwards towards Asia. Substantial changes in global economic weights over the past decades, in particular the rise of China and India, combined with major shifts on the energy supply side – the US shale revolution – have increasingly shifted the Gulf countries’ economic focus towards the Asian continent.[15]

There have been many shifts in the geopolitical dynamics among the international powers which have strategic interests in the Gulf region. Of the many factors creating such shifts, the growing importance of the two Asian powers – China and India – is the primary one that is leading the changes in the geostrategic international relations in the region. In fact, the rise of China and, to a lesser degree, India as superpowers in the making encourages the Gulf GCC states to modify their foreign policy with a focus moved from the traditional partnership with the West to a new one with the Eastern powers. First, the remarkable economic development of so-called ‘Chindia’ called great attention of the Gulf ruling elite.

The change in emphasis of GCC trade patterns is clear and the focus of Gulf business is moving eastwards. A cursory glance at the region today would support this view.
Asia is now the GCC’s most important trade partner, both in terms of its hydrocarbon exports as well as imports of machinery, manufactured goods and food. The GCC’s growing trade ties with developing Asia have also been accompanied by intensified bilateral investment relations. Migrant workers from Asia, especially from the Indian subcontinent, now account for more than half of the GCC’s labor forces, contributing significantly to economic prosperity and development in the Gulf GCC states.

This shift eastward is unsurprising given the travails of developed Western economies. With the sluggish recovery from the financial crisis in the EU and the US, Gulf economies have had to look elsewhere. Accordingly, the global shift has led to a growing interdependence between the Gulf and Asia. The essence of this geostrategic shift are basically twofold. First, the global energy demand is increasingly coming from the East than the West with Beijing already becoming the world’s largest net importer of oil and India being the third largest. Considering that two thirds of the Gulf oil went to Europe and the United States in 1980 whereas this share had declined to one third by 2004.[16] The recent East-bound Gulf oil flow indicates that there will be noticeable changes in geo-strategic calculation among the concerned countries. Saudi Arabia’s King Abdullah’s visits to India and China in 2006 proves this pivotal shift in the global energy market.

Now, the Gulf GCC states are in between the traditional Western allies and the newly emerged partners in the East, trying to figure out the best solution to today’s changing geopolitical scene in the region. So far, one thing that is clear is that the strategic partnership of long history between the Gulf States and the US is shaking and the role and presence of the US in the region will not remain the same due to the shift in the geopolitical interest of both sides. From the Gulf countries’ position, the rapidly growing economic power and the military strength of China and India makes a great sense to develop strong ties in order to rebalance global powers' interest. They fully understand that US security is currently inimitable by any other power but they are hedging their bets by diversifying their relations. In doing so, the Gulf GCC states are also developing relations with European allies, especially "Briexit" Britain. This can be explained by the fact that the Eastern powers still have a relatively limited effectiveness in satisfying the need of the Gulf GCC states compared to the Western partners with much longer and deeper history of strategic cooperation. Therefore, the Gulf GCC states’ geostrategic relations in the future will be determined by the adjustment and calculation between all the concerned powers in the region.

Conclusion:

The dynamics of the recent change in global economics and politics has shaken the old established relations between the Gulf States and the West leading to a conspicuous and evolutionary growing trend in Gulf-Asia exchange and relations. The rise of Asian economies and especially that of China and India coincided with a slow economic growth in the West and combined with the Shale energy revolution, shifted global energy demand towards the East. Increasing Gulf oil exports to the East spurred further trade, economic, investment and political relations. Corresponding to this change, the US that over the last forty decades guaranteed oil supply security and the Gulf region appears to have lost some of it desire to continue especially given the cost the on-going costs of staying engaged in such a turbulent region. Competition from Asia has also led to a reoriented US policy to the East in order to confront the raising Chinese power. This pivot in US policy combined with some apparent disagreements with the Gulf GCC states over regional politics and especially its nuclear talks with Iran, their arch-enemy, compelled the Gulf GCC states to diversify their economic and political relations. Taking account of the importance of Asia to their economic wellbeing and driven by their economic power and their desire for diversification, they began to play a larger part in regional and international relations especially in improving relations with some Asian countries.

However, despite all the apparent indications that the Gulf GCC states’ are gradually tilting to the East, relations with the West will remain one of the main cornerstones of their policies. Although it is an undeniable fact that the rise of China and India is attracting the Gulf States toward East while loosening the traditional ties between the Gulf countries and the US, the two Asian powers are not fully replacing the strategic role played by the Americans nor its other European allies in the short or medium terms. Given the dented trust of the GCC states with the US as a reliable ally, the Gulf States are not known to through their lot in one direction or another. Their long tried and tested strategies of diversification and omni balancing will always prevail especially considering their instinct for survival and their eternal quest for security. Global economic shift and relative global power redistribution will increase and focus their attention on rising Asia but they will try to hedge their bets through pragmatic foreign policies engaging with all, old and rising powers. This is more so because of the nature of the multipolar world where no one single country can dominate global economics and politics and the fact that currently there is no country that can replace the United States as a sole security guarantor of the region. The Gulf GCC states are learning how to manage multiple strategic relations and besides cementing their relations with Asia, the Gulf GCC states are also engaging Europe, especially the UK and France. In fact, France is benefitting the most from this niche opportunities, signing 15 billion euros worth of weapons deals this year which is almost double its 8.1billion Euros record for the whole of 2014.[17] Also, the Gulf GCC states are not being shy away from expressing their discontent over Obama administration’s decision to reach a nuclear deal with Iran as the lifting of sanctions are deemed to only strengthen the regional rival. However, it is too early to say what is going to be the stance of the newly elected US administration on the nuclear deal and what implications, if any, will this have on future US-GCC and GCC-Iran relations.