IPRI – Islamabad Policy Research Institute

Bridging the Trust Deficit

There are no permanent friends and foes in international affairs. This has been proved in the case of Tehran and Riyadh. Though the Islamic Republic of Iran and Saudi Arabia often tend to controvert each other on different issues, when it comes to interests, things change dramatically. On November 27, 2014, the 166th meeting of member countries of the Organisation of Petroleum Exporting Countries (OPEC) was held at the OPEC Conference Secretariat, Vienna, Austria. OPEC is a Vienna-based intergovernmental organisation of 12 oil-producing countries comprising of Algeria, Angola, Ecuador, Iran, Iraq, Libya, Kuwait, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. The meeting was held after the oil glut and subsequent plummet in oil prices. According to Brent Crude, oil prices are touching the benchmark of $ 77, while Iran has set predictive oil prices at $ 80 per barrel for its next fiscal year, starting from March 2015. Therefore it has started diplomatic manoeuvring to evade any future budget deficit due to decreased oil prices. Iran needs the cooperation of Saudi Arabia, as the latter is the largest oil producer in the organisation. Iran criticised Saudi Arabia for the plummeting oil prices as Riyadh has increased oil output after increased demand in the west due to the winter season. According to OPEC, Saudi Arabia substantially increased oil production by up to 100,000 barrels after considerably increased demand in Europe and the US.


On the sidelines of meetings prior to the OPEC ministerial conference to discuss the ongoing situation, Iranian Oil Minister Bijan Zanganeh met his Saudi counterpart, Ali al-Naimi. Both agreed on monitoring the market carefully and to react at a convenient time so as to manage the market. Both ministers agreed on a gradual cut in oil output to increase oil prices. Saudi Arabian Oil Minister Ali al-Naimi assured his counterpart that shared monitoring of the market would help in sustaining oil prices. Iranian Oil Minister Bijan Zanganeh said after the meeting that Iran and Saudi Arabia are “very close” and that the meeting had been held in an excellent atmosphere. Among the 12 members of the OPEC organisation, Venezuela and Iraq had called for output cuts while, after the bilateral meeting of the ministers of Iran and Saudi Arabia, both countries supported the stance of Venezuela and Iraq but asked for a gradual cut in output.


OPEC members produce about 40 percent of the world’s oil with Saudi Arabia currently enjoying the top position among OPEC countries in terms of oil production. Iran is the third largest oil producer in the organisation. Earlier, the International Monetary Fund (IMF) had urged Middle Eastern oil producers to restrain spending and speed up economic reforms to reduce the fiscal risks of a sustained period of lower oil prices. It predicted that if oil prices fell to $ 75 a barrel for a sustained period, Persian Gulf states would see projected fiscal surpluses of $ 275 billion falling to $ 100 billion. Moreover, the IMF warned that Saudi Arabia, the region’s largest oil exporter, could run a budget deficit as early as next year. Therefore, the shared economic interest helped Tehran and Riyadh to agree on an identical oil export policy, at least for the next few months.


Bilateral relations between Iran and the Kingdom of Saudi Arabia have been strained over different geopolitical and ideological issues such as differing interpretations of Islam, aspirations for leadership in the Islamic world and relations with the US and the west. Although Saudi Arabia and Iran are Muslim majority nations and rule through Islamic scripture, their relations are fraught with hostility, tension and confrontation. However, this is not the first time both antagonists have shown a great deal of pragmatism in their policies. Earlier, a long-awaited rapprochement between Riyadh and Tehran materialised in the case of the Islamic State (IS) issue, when Iranian Foreign Minister Javad Zarif visited Saudi Arabia to seek cooperation on the matter. Saudi Arabia is facing an existential threat while Iran has strategic concerns from the rise of IS. The oil export policy, based on their shared interests, would further reduce distrust between the two Middle Eastern stakeholders.


According to the neoclassical realist Gideon Rose, states act in the international arena according to internal and external variables. An internal factor, such as the economy, and external factor, like strategics, forced Iran and Saudi Arabia to alter their regional policies towards each other. However, the question remains how both states will change perceptions or misperceptions about each other in the years to come as “perceptions play an important part in individual and bureaucratic lines”. It will be a testing situation for both states to modify perceptions about each other and cooperate together for a long time.

Daily Times, December 05, 2014

Disclaimer: Views expressed are of the writer and are not necessarily reflective of IPRI policy.


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