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Iran Faces Regional, Economic Isolation Amid Rising Tensions With Saudi Arabia

Iran is facing increased political isolation as fallout from its escalating feud with Saudi Arabia, regional experts say. The tensions between the nations were sparked by the execution of a Shiite cleric by Saudi Arabia, and the subsequent torching of the Saudi embassy in Tehran.

David Andrew Weinberg, a senior fellow at the Foundation for Defense of Democracies, wrote on Monday that despite attempts by Iran to get closer to the Gulf Arab states, and perhaps isolate Saudi Arabia in the process, “Tehran is now on the defensive after ignoring repeated Saudi requests to protect diplomatic facilities for more than twelve hours before the embassy was ransacked.”

In the wake of the embassy attack, Sudan and Bahrain followed Saudi Arabia’s lead and cut diplomatic relations with Iran on Monday, and the United Arab Emirates downgraded its diplomatic relations with Iran the same day. The government of Kuwait announced on Tuesday that it would also cut ties with Tehran. This led The New York Times to observe that Iran “finds itself once again characterized by adversaries as a provocateur in the region and abroad.”

Iran could also be subject to economic difficulties, despite the expected billions of dollars it is likely to reap when nuclear-related sanctions are lifted by the West in the near future. In contrast, Foundation for Defense of Democracies executive director Mark Dubowitz wrote in The Wall Street Journal on Tuesday, Saudi Arabia will still have serious financial clout. The Saudis have increased oil production, which is likely to depress the market—meaning that Iran will not be able to earn as much when sanctions on its oil sales are lifted. But Riyadh also possesses considerable clout in the banking system.

Another economic weapon Saudi Arabia can deploy involves its hundreds of billions of dollars in overseas foreign holdings. The Saudis have significant influence at foreign banks and with foreign investors and could threaten to pull funds from entities doing business with Iran. Many institutions already worry that sanctions enforcement will become more aggressive after the Obama presidency ends. A Saudi threat could keep them further sidelined.

Through the nuclear deal, Iran found a way to free itself from U.S. and European economic pressures. But the Saudis have their own instruments of economic warfare. Whatever happens next, the fiscal picture for Iran could quickly become more grim.

[Photo: Associated Press / YouTube ]