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End of the Islamic Cold War: the Saudi-Iranian Detente and Its Implications

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Calhoun: The NPS Institutional Archive Theses and Dissertations Thesis Collection 2001-06 End of the Islamic Cold War: the Saudi-Iranian Detente and its implications McLean, Charles A. http://hdl.handle.net/10945/11009 NAVAL POSTGRADUATE SCHOOL Monterey, California THESIS END OF THE ISLAMIC COLD WAR: THE SAUDI- IRANIAN DETENTE AND ITS IMPLICATIONS by Charles A. McLean II June 2001 Thesis Co-Advisors: Ahmad Ghoreishi Robert J. Looney Approved for public release; distribution is unlimited 20020103 072 REPORT DOCUMENTATION PAGE Form Approved OMB No. 0704-0188 Public reporting burden for this collection of information is estimated to average 1 hour per response, including the time for reviewing instruction, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Washington headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and to the Office of Management and Budget, Paperwork Reduction Project (0704-0188) Washington DC 20503. 1. AGENCY USE ONLY 2. REPORT DATE 3. REPORT TYPE AND DATES COVERED June 2001 Master's Thesis 4. TITLE AND SUBTITLE: Title (Mixed case letters) 5. FUNDING NUMBERS The End of the Islamic Cold War: The Saudi-Iranian Detente and its Implications 6. AUTHOR(S) Major Charles A, McLean USMC 7. PERFORMING ORGANIZATION NAME(S) AND ADDRESS(ES) 3. PERFORMING ORGANIZATION Naval Postgraduate School REPORT NUMBER Monterey, CA 93943-5000 9. SPONSORING / MONITORING AGENCY NAME(S) AND ADDRESS(ES) 10. SPONSORING / MONITORING N/A AGENCY REPORT NUMBER 11. SUPPLEMENTARY NOTES The views expressed in this thesis are those of the author and do not reflect the official policy or position of the Department of Defense or the US Government. 12a. DISTRIBUTION / AVAILABILITY STATEMENT 12b. DISTRIBUTION CODE Approved for public release; distribution is unlimited A 13. ABSTRACT (maximum 200 words) Saudi Arabia and Iran are not only reconciling their diplomatic differences, but are also cooperating in numerous areas including oil, trade, and domestic security. Given their differences, what forces are lessening tensions and motivating them to pursue this new detente? More importantly, what are the implications of this new relationship? Shifting political sands in Saudi Arabia and Iran in the late 90s, the failure of the US "Dual Containment" policy, and the collapse of the Middle East Peace Accords are bringing the two rivals together. It is, however, Saudi Arabia and Iran's dire economic conditions, worsened by the 1998-99 oil price collapse, that forces them to cooperate. The main vehicle for Saudi-Iranian cooperation is the Organization of Petroleum Exporting Countries. The Saudi-Iranian detente holds vast implications for oil and stability in the region. Their cooperation ensures higher oil prices, which adversely affect the world economy. These higher prices, however, salvage both countries' economies, improving their domestic stability. The reemergence of Iran onto the Gulf political landscape also serves to lessen tensions in the region. The resulting improvement in inter-Gulf relations creates possibilities for establishing a stable regional security framework that may affect the United States' role in the region. 14. SUBJECT TERMS 15. NUMBER OF Saudi Arabia, Iran, Oil, Economics, Stability, OPEC, Persian Gulf, Dual Containment, Middle East PAGES Peace, President Khatami, Crown Prince Abdullah 142 16. PRICE CODE 17. SECURITY 18. SECURITY 19. SECURITY 20. LIMITATION CLASSIFICATION OF CLASSIFICATION OF THIS CLASSIFICATION OF OF ABSTRACT REPORT PAGE ABSTRACT Unclassified Unclassified Unclassified UL NSN 7540-01-280-5500 Standard Form 298 (Rev. 2-89) Prescribed by ANSI Std. 239-18 THIS PAGE INTENTIONALLY LEFT BLANK 11 Approved for public release; distribution is unlimited END OF THE ISLAMIC COLD WAR: THE SAUDI-IRANIAN DETENTE AND ITS IMPLICATIONS Charles A. McLean II Major, United States Marine Corps B.A., Virginia Military Institute, 1991 Submitted in partial fulfillment of the requirements for the degrees of MASTER OF ARTS IN NATIONAL SECURITY AFFAIRS and MASTER OF ARTS IN INTERNATIONAL SECURITY AND CIVIL-MILITARY RELATIONS from the NAVAL POSTGRADUATE SCHOOL June 2001 Author: /yLJL^M Charles A. McLean II Approved by: THIS PAGE INTENTIONALLY LEFT BLANK IV ABSTRACT Saudi Arabia and Iran are not only reconciling their diplomatic differences, but are also cooperating in numerous areas including oil, trade, and domestic security. Given their differences, what forces are lessening tensions and motivating them to pursue this new detente? More importantly, what are the implications of this new relationship? Shifting political sands in Saudi Arabia and Iran in the late 90s, the failure of the US "Dual Containment" policy, and the collapse of the Middle East Peace Accords are bringing the two rivals together. It is, however, Saudi Arabia and Iran's dire economic conditions, worsened by the 1998-99 oil price collapse, that forces them to cooperate. The main vehicle for Saudi-Iranian cooperation is the Organization of Petroleum Exporting Countries. The Saudi-Iranian detente holds vast implications for oil and stability in the region. Their cooperation ensures higher oil prices, which adversely affect the world economy. These higher prices, however, salvage both countries' economies, improving their domestic stability. The reemergence of Iran onto the Gulf political landscape also serves to lessen tensions in the region. The resulting improvement in inter-Gulf relations creates possibilities for establishing a stable regional security framework that may affect the United States' role in the region. THIS PAGE INTENTIONALLY LEFT BLANK VI TABLE OF CONTENTS I. INTRODUCTION 1 A. SUMMARY OF ARGUMENT 1 B. IMPORTANCE OF THE TOPIC 3 C. METHODOLOGY 6 II. SAUDI-IRANIAN PRE-CONDITIONS 9 A. HISTORIC, GEOGRAPHIC, AND RESOURCE FACTORS 9 1. Iran 9 2. Saudi Arabia 12 B. RELIGIOUS, ETHNIC, AND POLITICAL FACTORS 13 1. Iran 13 2. Saudi Arabia 14 C. PAST RELATIONS 15 1. 1979-1989 16 2. 1990-1996 22 D. SUMMARY 26 III. FORCES IN THE RAPPROCHEMENT 29 A. ENABLING FORCES »..29 1. President Khatami 30 2. Crown Prince Abdullah 36 B. DRIVING FORCES...... 39 1. Failure of Dual Containment 39 2. Failure of the Middle East Peace Accords 40 3. "Janus-Faced" Security Dilemmas 42 4. Troubled Economic Situations 43 a. Iran 44 b. Saudi Arabia 49 C. VEHICLE FOR RAPPROCHEMENT: OPEC 54 D. SUMMARY 64 vii IV. IMPLICATIONS 65 A. IMPORTANCE TO THE UNITED STATES 65 B. OIL 67 1. Oil and OPEC's Rebound 67 2. Potential Damage to World Economy 71 C. DOMESTIC STABILITY 75 1. Iran 76 2. Saudi 78 D. REGIONAL STABILITY 86 1. Iran's Reemergence and Reduced Tensions 86 2. Regional Security Framework 92 3. US Presence 95 E. SUMMARY 99 V. CONCLUSIONS 101 APPENDIX 105 LIST OF REFERENCES 111 INITIAL DISTRIBUTION LIST 119 vm LIST OF FIGURES Figure 1. Map of Iran and Saudi Arabia 10 Figure 2. Iran's Vali-ye Faqih, Ayatollah "Ali Khameini 30 Figure 3. Iranian President, Muhammad Ali Khatami 32 Figure 4. Saudi Crown Prince, Abdullah bin 'Abd al-Aziz 37 Figure 5. Khatami and Abdullah Meet in Riyadh, May 17,1999 62 Figure 6. Monthly OPEC Basket Price, 1997-2001 68 Figure 7. OPEC Basket Prices and the Price Band 72 IX THIS PAGE INTENTIONALLY LEFT BLANK LIST OF TABLES Table 1. Iran's Economic Performance (1998-2000) 77 Table 2. Saudi Arabia's Economic Performance (1998-2000) 79 XI THIS PAGE INTENTIONALLY LEFT BLANK Xll LIST OF ACRONYMS AND ABBREVIATIONS ABC American Broadcasting Corporation BBC British Broadcasting Company CBS Central Broadcasting Syndicate CIA Central Intelligence Agency CNN Cable News Network CNNfh Cable News Network Financial News CSIS Center for Strategic and International Studies DCP Dual Containment Policy DOE Department of Energy EIA Energy Information Administration FBIS Foreign Broadcast Information Service GCC Gulf Cooperation Council GDP Gross Domestic Product IISS International Institute for Strategic Studies ILSA Iran-Libya Sanctions Act IMF International Monetary Fund ERNA Islamic Republic News Agency MECS Middle East Contemporary Survey MEED Middle East Economic Digest MEES Middle East Economic Survey MEJ Middle East Journal MEP Middle East Policy MERIA Middle East Review of International Affairs OIC Organization of Islamic Conferences OPEC Organization of Petroleum Exporting Countries SAMBA Saudi American Bank SPA Saudi Press Agency UAE United Arab Emirates US United States WMD Weapons of Mass Destruction b/d barrels per day mb/d million barrels per day p/b per barrel xin THIS PAGE INTENTIONALLY LEFT BLANK xiv EXECUTIVE SUMMARY Given events over the past four years, it seems the Saudi-Iranian "Cold War" is thawing for the immediate future. The rapprochement is a major step for Saudi Arabia, but especially for Iran given the Islamic revolution's ideological differences with Saudi Arabia's monarchy. Yet, after twenty years of hostile relations, often bordering on open conflict, Saudi Arabia and Iran are not only reconciling their differences, but are also cooperating in numerous areas. The result is an unprecedented series of confidence building measures and agreements between the two countries all but cementing their new relationship. The most recent and important of these being the mutual domestic security agreement signed in April 2001. Given their inherent differences and previous relations, what are the forces driving the rivals to cooperate? What is lessening tensions and motivating Tehran and Riyadh to pursue this new detente? To understand just how far Saudi Arabia and Iran have come in their relations it is essential to know where they began. Saudi Arabia and Iran are vastly different nations who have different histories, geography, and natural resources. Their people practice similar, yet different versions of Islam and they are ethnically and culturally unlike one another. Most importantly, Saudi Arabia and Iran's political systems and ideological principles are quite dissimilar.
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