Iran and Saudi Arabia will restore diplomatic ties, easing a geopolitical rivalry in the Persian Gulf that has rattled oil markets.
The countries have been shaking hands for at least two years, first in secret and gradually more publicly. It is part of a wider regional realignment that has seen several old enemies restore or forge new ties as the US withdraws from the Middle East, a key security concern for Riyadh.
The agreement to restore relations, which includes a commitment to reopen embassies within two months, was signed in China after days of negotiations between the secretary of Iran’s Supreme National Security Council, Ali Shamkhani , and its Saudi counterpart, the Islamic Republic News Agency reported. Saudi state media confirmed the deal.
“Clarifying misunderstandings” and looking towards better relations “will certainly develop regional security and increase cooperation among the Persian Gulf countries,” IRNA quoted Shamkhani as saying.
Oil prices sustained losses after the announcement, which could soften the geopolitical premium that has periodically hit the market as a result of tensions between the two adversaries, particularly over the war in Yemen, where they support opposing sides .
In 2019, an assault claimed by Iran-backed Yemeni fighters on Saudi Arabia’s Abqaiq facility temporarily knocked out half of the world’s largest oil exporter’s production capacity, prompting a brief spike in prices. Brent futures were trading near $81 a barrel on Friday.
“This is a major game changer and a recognition that Iran’s policy of isolation and containment has not worked in Riyadh’s interest,” said Sanam Vakil, deputy head of the Middle East and North East program at ‘Africa at Chatham House.
Saudi Arabia cut ties in 2016 after its embassy in Tehran was stormed.
Now Riyadh has come to the idea that direct diplomacy can help the kingdom manage its tensions with Iran, including Yemen, as well as prevent future attacks, Vakil said. There is still work to be done to achieve this, and what has been announced today is a roadmap, he added.
The talks had stalled in December after Tehran accused Riyadh of using satellite TV channels to support protests that have rocked the Islamic Republic, AP reported.
Saudi Arabia, which has fought Iran-backed fighters in Yemen since 2015, is pushing for an end to a conflict that has exposed its oil facilities to drone and missile attacks. Establishing formal relations with Iran could help ease that conflict and potentially allow Saudi Arabia to withdraw from the war if a peace deal materializes.
Saudi Arabia’s top priority is to “find a way to have a permanent ceasefire in Yemen,” Saudi Foreign Minister Prince Faisal Bin Farhan said in Moscow on Thursday.
–With help from Sam Dagher and Grant Smith.
