United States Institute of Peace

The Iran Primer

American CEOs Eye Iran

Interview with Christopher Schroeder

How often do you travel to Iran?
 
I have gone on two trips to Iran, in spring of 2014 and 2015. They were coordinated by a small group of members of the Young Presidents’ Organization and World Presidents’ Organization — a global network of some 22,000 CEOs. This subgroup, called the Presidents’ Action Network, has done previous trips to conflict areas such as Israel and the Palestinian Territories, India and Pakistan, North Korea and others. The group has organized three trips to Iran in the past three years, and I have attended the last two. About a dozen CEOs from the United States, the United Kingdom and Canada, with a few spouses, went on the 2014 trip. This year, the group was a bit larger — about 24 travelers in all.
 
What is the purpose of these tours? What did you observe?
 
In light of Rouhani's election in 2013, and the broader discussions between Iran and the United States this past year, we felt that this was a perfect time to explore in-person and on the ground what the business and economic climate in Iran is. Little of what we saw is what we are normally exposed to through American news, which tends to focus on areas of political conflict and the nuclear talks. The frame of reference for many Americans is still based on the takeover of our embassy in Tehran, the Islamic revolution and subsequent decades of tense relations — especially during the Ahmadinejad years (2005-2013).  
 
Few of us had a sense for what Tehran looked like — the quality of roads, the quantity of traffic but of newer cars, how most signs are also in English, how couples and families in parks show open displays of affection. We were deeply impressed by the quality of the infrastructure, the talent, and educational skill (especially engineering) of the youth. We were treated with great warmth and respect as Americans in both meetings and random encounters. There was strong pro-deal sentiment — even presumption of a nuclear deal — among virtually everyone we met.
 
Iran is a surprisingly wired country. Nearly 65 percent of homes have broadband access. Mobile penetration is more than 120 percent, meaning people have more than one phone or SIM card. Iranians are now using 40 million smartphones (full mobile computing devices) from brands including Samsung, HTC, a local carrier (all using Android software) and, despite the sanctions, Apple. I was told that there are more than 6 million iPhones in the country, mostly attained through Istanbul and Dubai. 
 
Last year there was very limited access to 3G data on mobile phones, perhaps as low as one million subscribers. We were told mobile carriers in Iran were going to roll this out aggressively in the following year, but we had strong doubts. One year later, however, there are 20 million 3G and now 4G subscribers.
 
Everyone across age categories accesses unfiltered internet through virtual private networks (VPNs). Not only are Facebook and Twitter ubiquitous, but, for the first time, Iranian officials noted to our group that the two social media platforms would be useful market distribution channels for Iranian businesses wanting to reach consumers. Both sites however, are technically banned.  
 
The government runs 32 tech “incubators” around the country, focused on key strategic areas such as agriculture, banking, security, education and infrastructure. There is also a nascent but rapidly growing private startup community, often hosted at universities, where entrepreneurs are creating their own version of successful companies in the West as well as services for the Iranian and regional markets. For example, the eCommerce company Digikala doubled in value since last year to a reported $300 million, and there were Iranian versions of audio books, eBay, travel booking sites and more. Government planners hope that the eHealth space will be worth more than $1 billion in 2017, and that their efforts to lead in mobile payments will “eliminate the need for plastic” (mostly debit cards) in several years.
 
We were told repeatedly that Stuxnet — the computer worm that allegedly targeted Iran’s nuclear program — was a wakeup call for people to start taking technology more seriously. The government invested over $4 billion in high tech infrastructure last year, and has plans for another $25 billion in the next three years.
 
International sanctions on hard goods seemed less concerning to everyone that we met, as almost anything was attainable at a price. Sanctions on banking and the SWIFT global financial service, however, drove the economy to its knees in recent years. Iranians talked about reducing inflation from 50 percent to 14 percent in the last year in large part due to significant currency devaluations — but there was some doubt about that, and the cost has been great. While we saw few signs of abject poverty in Tehran, many people have had to take more than one job in the last year. 
 
Our hotel was packed with Europeans — mainly Germans and Scandinavians — both business types and middle aged tourists. The great stand outs, however, were the Chinese travelers. Even the young people at startups we met said they had seen them. Chinese smartphone producer Xiomi is reportedly making moves to come to Iran’s mobile markets aggressively. Several Iranians told us that 25,000 to 30,000 or more Chinese expatriates are now in Iran, many of whom speak Farsi. But we could not confirm this.
 
Our overall sense is that Iran is one of the most advanced emerging markets we have seen waiting to re-enter the global community. Corruption is quietly mentioned as massive; the fact that people have long worked around systems has bred a strange ethic into the business culture. But the talent, tenacity, and global mindedness were concrete and universal.
 
The greatest take-away from the trip is that the new generation — people under age 35 who represent 60 percent of the country's population — came of age well after the Islamic Revolution. Many were engaged in the 2009 Green Movement protests. Most are utterly wired, and see the world around them daily. Their premises on how they see the world and ambitions are different than their parents. On the current path, the youth do not see themselves attaining their dreams, or even moving out to live in their own apartments. They see increased global engagement as the single greatest hope for self-actualization and economic success.

What are the prospects for American investment in Iran?
 
The prospects are significant. Many American brands have long been popular and accessible there, other, newer brands — often tech enabled like social networks, apps and music — have high demand and are accessible on Iranian mobile devices. From machine tools to software, there is significant opportunity. The travel business will also be significant — as there were very few four or five star hotels in and around some magnificent tourist areas.  

Who have American CEOs met with in Iran?
 
We travelled to Iran as tourists, and visited the remarkable historic and cultural centers near Shiraz, Isfahan and Tehran. But we had a strong focus on understanding the business and political landscape. So we met leading figures in banking, private equity, venture capital as well as some of the very influential heads of conglomerates across diverse industries. We met with members of the art community, and one (albeit reformist) grand ayatollah in Qom. The next generation tech startup communities and recent university grads were particularly interesting to me.
 
There is no question that the majority of what we saw is what the trip handlers wanted us to see, though we were struck by many surprises even in that lens. We were aware of hardliners that oppose more engagement with the West, but we did not meet with any during our trip.
 
We were told that only 500 to 1,000 visas are granted per year to American travelers, and mostly for tourism. But clearly more and more Americans are beginning to seek out opportunities should relationships open up. Many people positioned in Dubai, Istanbul and elsewhere are closely monitoring the situation.

What are potential obstacles to American investment?
 
Right now, beyond the obvious sanctions, they are legion. Rule of law, property rights, and the ability to repatriate capital are among the greatest challenges in emerging markets and are significant in Iran as well. Supreme Leader Ayatollah Ali Khamenei does not have an obvious successor, and that lack of clarity introduces risk. Whether or not reaching an agreement on the nuclear issue opens up the possibility for dialogue on other regional issues remains a central question. There is a sense, at the same time, that entry into the global market is essential to Iranians.
 
What could be the timetable for investment if Iran and the world’s six major powers finalize a nuclear deal by June 30?
 
The timetable would be heavily dependent on the speed of sanctions relief, especially the first wave and its size. Real success in newer markets requires trusted relationships, the time to cultivate them and a sense of co-authorship in transactions. Access to markets through technology and the quality of Iranian infrastructure may make this all move much faster there than in any other new market of the last two decades. But the challenges are significant.
 
Christopher M. Schroeder is a U.S.-focused venture investor and author of Startup Rising: The Entrepreneurial Revolution Remaking the Middle East. He was formerly co-founder of healthcentral.com, which was sold in 2012, and CEO and Publisher of Washingtonpost.Newsweek Interactive. He may be followed at @cmschroed.
 

Photo credits: Modares Expressway by Saeid Zebardast  (cropped) via Flickr (CC BY-SA 2.0), Unofficial Apple store by Robin Wright, Azadi Tower by Maral Noori

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Sagging Oil Prices and Iran

Matthew M. Reed

What impact has the fall in global oil prices had on Iran?
 
The oil price collapse since June has had only a modest impact on Iran— so far. But lower revenues have already forced President Hassan Rouhani to significantly reduce budget projections and even decrease Iran’s dependence on oil. More steps may lie ahead, depending on both the market and the results of Iran’s talks with the world’s six major powers on a nuclear deal.

In December, Rouhani presented a budget for 2015 based on an average oil price of $72 per barrel— down from about $100 per barrel in the 2014 budget. But oil has been trading below $50 and it may stay low. So the government has slashed the projected price again to $40 per barrel. Rouhani intends to reduce Iran’s dependence on oil from an average of 45 percent of all revenues to about 31.5 percent.
 
The imploding oil market comes at a time when Iran is already suffering serious economic challenges due to mismanagement, corruption and international sanctions. Inflation remains high even though it has halved to less than 20 percent over the last year.
 
Iran’s currency, the rial, lost half its value in 2012 amid tightened sanctions and has not recovered. The rial’s value climbed after Rouhani took office in August 2013, but it has since fallen again. By the end of 2014, it was trading on the unofficial “open market” for 35,000 per dollar, a modest improvement to the 40,000 per dollar rate at the end of Mahmoud Ahmadinejad’s term.
 
In early December, Iran raised bread prices slightly. More subsidy reform could be on the way to help cope with the shortfall in revenue.
 
Even when prices were high in recent years, sanctions did serious harm to Iran’s economy. But those same sanctions may defer some of the pain from falling prices. Iran’s oil revenues are currently held in customer countries and can only be used to pay for goods and services originating in those countries. For more than two years, revenues have been piling up in banks overseas due to sanctions. By early 2015, they totaled tens of billions of dollars in China, India and other top Iranian customers. Iran may only be adding to these accounts more slowly now that it is selling oil for less.
 
Oil traders and industry sources report that Tehran is offering generous credit terms to customers so there is a delay between oil delivery and payment. If the pain of the price drop is delayed, it won’t be for much longer.

How is Iran’s shortfall in revenue impacting the debate over nuclear talks?
 
Falling oil prices have accelerated the debate in Iran linked to the nuclear file. Supreme Leader Ayatollah Ali Khamenei and hardliners in his corner seem to prioritize Iran’s nuclear program over reconnecting the economy to world markets. They argue that belt-tightening, improvements in self-sufficiency and acceptance of some hardship can allow Iran to maintain its nuclear program— without compromising its revolutionary values. Khamenei calls this his “Resistance Economy” program. The concept, however, remains a catchphrase more than a comprehensive set of policies.
 
President Rouhani, on the other hand, has argued that Iran's economic prospects are directly tied to sanctions and its relationship with the outside world. “Our political life has shown we can't have sustainable growth while we are isolated,” he told a meeting of economists on January 4. To applause, he contended that Iran's foreign policy must serve its economy. Rouhani may not have dismissed Khamenei's “Resistance Economy” outright, but he surely hit a nerve.
 
The hardliner response was immediate and fierce. Days after Rouhani’s speech, Judiciary Chief Sadeq Amoli Larijani insisted thatone must not tie economic issues to nuclear talks.” Connecting the issues and debating them provided “reassurance” to Iran’s enemies, Larijani warned.
 
The debate is far from over but the price collapse is forcing leaders and politicians to pick sides. The supreme leader's allies in the media, judiciary, and military have since warned Rouhani not to incite public opinion against the nuclear program.

What impact have falling oil prices had on Iran’s relations with its oil-rich Gulf neighbors and other OPEC members?
 
Iranian officials have blamed the price collapse on Saudi Arabia and the United States. President Rouhani and Oil Minister Bijan Zanganeh have claimed that the collapse is a political conspiracy. “Those that have planned to decrease the prices against other countries will regret this decision,” Rouhani warned in a televised speech on January 13. “If Iran suffers from the drop in oil prices, know that other oil-producing countries such as Saudi Arabia and Kuwait will suffer more than Iran,” he added.
 
Other officials, like Deputy Foreign Minister Hossein Amir Abdollahian, have called on Saudi Arabia to cut production in order to lift prices.
 
To Riyadh, Iran’s complaints are just noise. Other cash-strapped oil producers also want Saudi Arabia to cut production and keep prices up for everyone else. The Kingdom, however, has little confidence that it or OPEC can prop up prices for long.
 
Instead of gambling on production cuts, the Saudis want to let the market self-correct: They believe in Economics 101. This may take time, but other Gulf and OPEC producers, including Kuwait and the United Arab Emirates, support this strategy. “We cannot continue to be protecting a certain price,” said UAE Energy Minister Suhail al Mazrouei on January 13.
 
Meanwhile, OPEC hawks like Iran and Venezuela can only watch from the sidelines. Venezuelan President Nicolás Maduro visited Tehran in early January to confer with Iranian leaders. “Our common enemies are using oil as a political weapon, and they definitely have a role in the sharp fall in oil price,” Supreme Leader Khamenei reportedly said in a meeting with Maduro.
 
Saudi-Iranian relations were grim before the fall in oil prices. Some foreign policy analysts speculate about whether Saudi Arabia has a secondary agenda, namely slashing prices to hurt Iran. But Riyadh would most likely keep production steady even if it had friendly relations with Iran.

How resilient are Gulf economies compared to Iran?
 
The Gulf states are more dependent on oil revenues than Iran, but they stashed money away over the last half decade to tide them over during busts. Saudi Arabia, Kuwait, the UAE and Qatar are flush with savings, so they can endure lower prices for now. The situation is more challenging for Bahrain and Oman. Unlike Iran, the Gulf states have easy access to international finance and loans.
 
Some sober analysts have argued in Iran’s reformist media that the price collapse will starve the country's oil and gas industry of much needed continuous investment, doing lasting damage. But Iran did weather the last two price collapses in 1999 and 2009.
 
Matthew M. Reed is Vice President of Foreign Reports, Inc., a Washington, D.C.-based consulting firm focused on oil and politics in the Middle East. Follow him on Twitter @matthewmreed
 
Online news media are welcome to republish original blog postings from this website in full, with a citation and link back to The Iran Primer website (www.iranprimer.com) as the original source. Any edits must be authorized by the author. Permission to reprint excerpts from The Iran Primer book should be directed to permissions@usip.org
 

Former US Congressman Visits Iran

Interview with Jim Slattery

Jim Slattery, a former U.S. Congressman from Kansas, visited Iran in December 2014 to attend the “World Against Violence and Extremism” (WAVE) conference, an initiative led by President Hassan Rouhani. He was the first former congressman to visit Iran since the 1979 revolution. Mr. Slattery has been involved in interfaith dialogue initiatives with Iran for ten years, in cooperation with the Catholic University of America, the Peace Research Institute of Oslo, and the Vatican. During his recent visit, he met with senior Iranian officials and discussed the current state of nuclear negotiations between Iran and the world’s six major powers – the United States, Britain, France, Russia, China, and Germany.

You recently became the first former member of Congress to visit Iran since the 1979 revolution. Why did you go? Who did you meet with, and what did you discuss? What did you learn?
 
I went to Iran because I wanted to encourage the Iranians to issue a strong statement condemning violence in the name of religion, especially Islam. I also wanted to learn more about Iran first hand. I am amazed at how few American decision-makers have any personal experience in Iran. Very few American policy-makers have ever been to Iran and even fewer know key leaders in the Islamic Republic. I share President Eisenhower’s view of people-to-people diplomacy.  
 
I met with high ranking members of the Rouhani Government and key leaders in the Majles (parliament). They do not want to be identified in the American media for meeting with me, although some of their names have already appeared in news stories about my trip. But suffice to say I met with the key leaders. I did not meet privately with the president or the supreme leader, but I met with people who are close to them. President Rouhani gave a speech at the WAVE conference strongly condemning violence, particularly in the name of Islam. 
 
We discussed the current state of the nuclear negotiations. I left with the clear impression that the current Iranian government led by President Hassan Rouhani and Foreign Minister Javad Zarif is deeply committed to getting a deal with the United States on the nuclear issue. I think the Rouhani government is prepared to enter an agreement to forego the development of a nuclear bomb. Such an agreement would be consistent with the fatwa issued by the supreme leader. But Iran will insist on retaining an enrichment capability for peaceful purposes consistent with its view of the Nuclear Non-proliferation Treaty.
 
The Iranians are very worried the U.S. mid-term election will make it difficult for President Obama to implement an agreement. The Iranians have little confidence that Congress will have the ability to lift sanctions anytime in the near future. The Rouhani government is prepared to be very flexible in dealing with the technical nuclear issues, but they urgently need sanctions relief. The Iranians think their nuclear program is leverage to gain sanctions relief. The United States thinks sanctions are its leverage to persuade Iran to forego the development of a nuclear bomb.
 
I walked the streets of Tehran freely without fear. Very different than Baghdad. The Iranians I encountered were friendly and interested in the United States. I was impressed with the energy on the streets of Tehran. There are a lot of construction cranes present and the auto congestion is terrible. About every third or fourth car was driven by a woman…Very different than in Saudi Arabia. There were a lot of relatively new cars. 
 
 
 
 
What is your assessment of the mood in Tehran as it negotiates with the world’s six major powers on a nuclear deal?
 
It is hard to get an accurate measure of the mood in Tehran. Young people and the press I met all seemed anxious to see an improved relationship with the United States and Europe.  Keep in mind that 60 percent of Iranians are under age 30, and 60 percent of university students are female. My friends in Iran tell me they are very worried about what they are going to do with all of the educated women! They understand clearly that economic development is key to the stability of the Islamic Republic over the long term.
 
Some lawmakers intend to introduce legislation that would impose new sanctions on Iran if talks falter. What implications could passing such a bill have on the talks?
 
It is a bad idea for Congress to pass additional sanctions at this time. This will only complicate the negotiation process while causing Iranians to question further whether President Obama can implement an agreement because of domestic political opposition in the US. The United States is concerned about whether the Supreme Leader will approve an agreement negotiated by Zarif. So both sides have similar concerns. Additional sanctions at this time send exactly the wrong message, and I fear this legislation could disrupt the talks. 
 
What could a deal mean for US-Iranian relations?
 
A nuclear deal will open the door for immediate cooperation on a long list of critical issues in the region including but not limited to ISIS, Syria, Iraq, Afghanistan, the Taliban, Hezbollah and Israel. Iran would welcome an agreement between the Palestinians and Israel. A deal could also lead to cooperation on oil and natural gas supplies. Iran is a country of more than 70 million people with enormous energy assets and resources with a smart, well-educated population that could become a huge new market for the United States and Europe.
 
You attended the “World Against Violence and Extremism” (WAVE) conference in Tehran. What stakes does Iran have in combatting terrorism in the region?
 
Iran is very worried about ISIS and terrorism in the region. We must not lose sight of the fact that ISIS is Sunni, not Shiite. ISIS hates Shiites as much as they do Jews and Christians. Don’t forget that Iran cooperated with the United States in taking down the Taliban in Afghanistan. Iran is going to play a bigger role in the region - given its geography, history, religion, population and energy resources - whether we like it or not. We must engage Iran at this historic time when its elected leadership wants engagement with the West.  
 
Online news media are welcome to republish original blog postings from this website in full, with a citation and link back to The Iran Primer website (www.iranprimer.com) as the original source. Any edits must be authorized by the author. Permission to reprint excerpts from The Iran Primer book should be directed to permissions@usip.org
 

Photo credits: President.ir, Tehran bazaar by Maral Noori, Wikimedia Commons

Nasser Hadian: Iran’s Concerns about Iraq

Interview with Nasser Hadian

The Islamic State in Iraq and Syria (ISIS), a militant Sunni group, has taken control of much of eastern Syria and, most recently, northern Iraq. What are the implications for Iran?
 
            Stabilizing Iraq is extremely important to Iran for a number of reasons.
 
            First, in the long term, Iran is concerned that the insecurity in Iraq could spillover if the situation is not controlled and contained. Iran, however, is not immediately concerned with its own border security.
 
      Second, Tehran basically prefers the continuation of Nouri al Maliki’s government, which is the legitimate government in Baghdad. Iran has good relations with Iraq and does not want a disruption of the post-Saddam Hussein system.  
 
      Third, ISIS has targeted Shiites. It is now stirring up a sectarian war in which Iran would be obliged to protect not only its own citizens in Iraq, but also Iraqi Shiites. ISIS seems to have captured territory with logistical, intelligence and material support from Saudi Arabia and other countries. So Iran feels that it has to back up the government in Baghdad. Tehran, however, does not want the conflict to escalate.
 
What is Iran doing to support the central Iraqi government?
 
            Tehran is providing political support to Baghdad but is keen to prevent the conflict from turning into a full-blown sectarian war. So it is not sending troops. Reports in the media about Iran sending soldiers are purely guesses and have been denied by top officials. But Tehran is likely helping Iraq, under the table, by offering advice about how to fight the militants, and helping with logistics and intelligence gathering. Iran probably had military advisors in Iraq before the crisis anyway.  
 
      President Hassan Rouhani has suggested that Iran could consider joint action with the United States. But Supreme National Security Council Secretary Ali Shamkhani has been careful not to associate Tehran with Washington at all on this issue because he is concerned that many Sunnis in the region would consider U.S.-Iran cooperation a conspiracy of Shiites and Americans against them.
 
      Maliki may be able to quell ISIS if he mobilizes militias to help the Iraqi armed forces. But if Iraq cannot solve this crisis within the next two to three months, the conflict could turn into a protracted war and last for several years. And ISIS may shift its forces if it finds Maliki’s government weaker than the Assad regime, resulting in a war of attrition. The oil-rich region is also an attractive base of operations for the militants, which have already stolen $425 million from banks across Iraq.
 
            An ISIS shift to Iraq would also have regional implications. It would make it much easier for Assad’s forces to suppress Syrian opposition forces. Unlike Iraq’s armed forces, the Syrian Army is relatively intact. The Syrian government is holding back the opposition, which is supported by Saudi Arabia, other Gulf states, and many Western nations. But the swift takeover of Mosul by ISIS showed that the Iraqi army is weak.
 
What are Iran’s core interests in Iraq? Do they overlap with U.S. concerns? If so, how could the two cooperate?
 
      Both Tehran and Washington are concerned with stabilizing Iraq and preventing the breakout of a sectarian war. They also want to ensure the safe passage of oil to international markets and preserve the territorial integrity of Iraq.
 
      Iran and the United States also want to see a more inclusive government in Baghdad. Even Iran would like to see the Shiites share more power with the Sunnis and Kurds to preserve the Iraqi state. Iran wants to see Kurdistan as part of Iraq, even if it continues to be an autonomous region.
 
      Iran’s influence in Iraq and its shared interests with the United States probably led Senator Lindsey Graham to suggest talking with Tehran about the crisis. But there is virtually no chance of publicized cooperation. The more likely scenario would be similar to U.S.-Iran cooperation in Afghanistan in 2001, when Tehran provided U.S. forces with intelligence that helped overthrow the Taliban.
 
            But not all U.S. interests totally align with Iran’s. Washington is likely concerned with ISIS spreading its operations to U.S. allies in the Gulf. 
 
Nasser Hadian is a professor of political science at the University of Tehran.
 
Online news media are welcome to republish original blog postings from this website in full, with a citation and link back to The Iran Primer website (www.iranprimer.com) as the original source. Any edits must be authorized by the author. Permission to reprint excerpts from The Iran Primer book should be directed to permissions@usip.org
 
Photo credits: President.ir and Ministry of Defense
 

 

US and Saudi Arabia: Differences on Iran

Interview with David Ottaway by Faris Al Sulayman

What came out of President Obama’s trip to Saudi Arabia and discussions on pressing issues of mutual concern, especially on Iran nuclear talks?
 
           Obama and King Abdullah agreed that their shared goal is to prevent Iran from gaining a nuclear weapons capability. But Saudi Arabia is perhaps more concerned about the implications of improved U.S.-Iran relations if a nuclear agreement is reached. The Sunni kingdom is worried about a tilt in U.S. foreign policy toward Shiite Iran at the expense of Saudi Arabia and the other Sunni sheikhdoms. Obama has said that he is willing to repair the U.S.-Iran relationship. But he has not spelled out what this might mean in practice and what other issues the two countries could cooperate on.
 
     Washington and Tehran were holding secret talks for a year starting with President Mahmoud Ahmadinejad then under President Hassan Rouhani. The Obama administration had not shared the content of those discussions with its Arab allies, which has raised enormous suspicions in the Gulf about U.S. intentions for Iran.
 
     President Obama probably found it difficult to provide the kind of assurances that the Saudi leadership is seeking on Iran and nuclear negotiations.
 
What are the basic differences between the United States and Saudi Arabia on Iran?
 
            The United States and Saudi Arabia appear to have different visions for solving the Iranian nuclear dispute. Saudi Arabia, much like Israel, wants Iran to relinquish its uranium enrichment capabilities or at least cap enrichment at 5 percent – far below weapons grade, or 90 percent. Riyadh also wants Iran’s existing stockpile of 20 percent enriched uranium to be shipped out of the country or turned into a form that cannot be used to fuel a weapon. But the United States and the other five major world powers negotiating with Iran – Britain, China, France, Germany and China – may be open to allowing Tehran to keep limited enrichment capabilities.
 
     Riyadh also wants Washington to take a much more aggressive role in ending President Bashar Assad’s rule in Syria. Damascus is Tehran’s closest ally in the Middle East, so the main battle ground between Saudi Arabia and Iran is Syria. Riyadh is keen on the United States providing more sophisticated arms — anti-aircraft missiles in particular—to opposition forces.
 
            Washington and Riyadh also differ in their strategic approach to the Syrian conflict. Tehran has reportedly invested millions of dollars in Syria’s economy and provided training and arms to its army. So Saudi Arabia’s involvement in Syria is part of a wider effort to curb Iranian influence in the Sunni Arab world. The Sunni kingdom seems dedicated to rooting out the Alawite regime as a way to cut off Iran.
 
If the world’s six major powers and Iran reach an agreement that allows Tehran to continue enriching uranium, might Riyadh pursue its own nuclear program?
 
            Saudi Arabia is further developing its relationship with Pakistan, which became the world’s first Muslim nuclear power in the early 1970s. Riyadh has already built a new center for medium range missiles, and it has a new generation of Chinese missiles. Saudi officials have also been speaking with Chinese military and political leaders.
 
           If Tehran sprinted towards a nuclear weapons capability, Riyadh would likely call on Islamabad to provide warheads for those missiles – shortening the process of becoming a nuclear power. But Saudi Arabia is highly unlikely to enlist Pakistani help unless Iran pushes its program forward.

 Military Balance

 **
 
How are Saudi Arabia’s policies influenced by its relationship with the wider Islamic world? 
 
           First, Saudi Arabia sees itself as the religious leader of the Sunni Arab world. But it is increasingly trying to be the political leader because it has wherewithal to spend money on helping its allies. Saudi leaders feel vindicated by the failures of the Arab spring, and they would like to assert their political and financial weight in the Arab world. The problem is that they have little military throw weight. Saudi Arabia still depends on the United States for its military and security apparatuses and it has a limited ability to project force outside its borders.
 
Oil Balance

 ***
 
David Ottaway is a senior scholar at the Woodrow Wilson International Center for Scholars.
 
Faris Al Sulayman was a research assistant at the Woodrow Wilson International Center for Scholars from 2013-2014.
 
 
*Estimated spending, includes US Foreign Military Assistance via IISS
** Based on “The Gulf Military Balance” report by Anthony Cordesman and Bryan Gold. Click here for Cordesman’s chapter on Iran’s conventional military. Also see The International Institute for Strategic Studies’ annual assessment of worldwide military capabilities.

 

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