Bi-Weekly Geopolitical Report – Implications of the Iran-Saudi Arabia Détente (May 1, 2023)

Bill O’Grady | PDF

In early March, China brokered a thaw between Iran and the Kingdom of Saudi Arabia (KSA).  The two countries have been at odds for decades, even before the Iranian Revolution in 1979.  Essentially, both nations believe themselves to be the rightful leader of the region.  The nations had been allied during the reign of the Iranian Shah under U.S. auspices, but after the revolution, the U.S. broke off ties with Iran and that break remains to this day.  The KSA has seen relations with Iran change over time, where sometimes they are improving and at other times they are at odds.  Before this most recent thaw, the KSA had broken off relations with Iran in 2016 in retaliation for violent protests directed toward Saudi embassies due to the execution of a Shiite activist by the KSA.

The decision to improve relations, especially under the guidance of Beijing, is noteworthy.  In this report, we will begin with why this attempt to improve relations has occurred now.  From there, we will examine the geopolitical implications that the improved relations could bring.  At the same time, as we noted above, Iran and the KSA have been in opposition for a long time, so an assessment of how far this thaw will go is also important.  We will conclude with market ramifications.

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