US hegemony on decline 

Spread of COVID-19 and pandemic dig into the world economic structures and eroded or better to say surfaced the principle ills of the global hegemonic economic fundamentals. United States printed $15 trillion since the virus turned pandemic in the country. It would be safe to say that US added this volume of money during January 2020 to December 2022. This indicated resilience of the economy at the surface. However, recent US Silicon Valley Bank’s bankruptcy shows that the economy is began to react to excessive liquidity in the money market.

Next came the war in Ukraine and America’s zealous to engage the entire world towards fighting Russia. According to European Central Bank Secretariat Report, February 2023, Europe alone has spent $1.45 trillion on the war in Ukraine in form of subsidies to own citizens, higher costs of energy imports bills and aid to Ukraine. United States has spent a huge amount though recovering most of it through exports of own expensive LNG to Europe, Japan and South Korea.

World geophysical map redefined 

Although the war in Ukraine and the hasty entrance and engagement of the United States and Western European countries into the conflict, is indicated as a major factor in a redrawn geopolitical chessboard of the Middle East and energy, it is imperative to note that the new roadmap of the region was already in process of taking new shapes based on new realities.

Middle East in general and Saudi Arabia in particular had come to conclusion that America virtually abounded the Middle East. Emergence of shale oil and gas, turned US into a net energy exporter again after seventy years. In the meantime, America’s Forever Wars in the region, proved that Pentagon is quite in entering wars but too sluggish to finish as witnessed in Iraq, Afghanistan and Syria. 

Saudi Arabia and United States entered a strategic alliance back in 1951 on the basis of which Washington undertook to safeguard security of the Kingdom. In return Riyadh agreed to sell its oil in dollar only. In fact, Petrodollar entered the vocabulary of the global energy scene on August of 1951 in Washington. It is needless to remind that the US envisaged de-coupling of dollar from gold and the idea of Fiat Currency that is a currency that is not backed up by any accepted reserves was not accepted. In fact, the US would lose its international position to British pound again. Once oil was priced in US dollar, the country could turn its back on Bretton Woods agreement.

Now back to present, once the United States realized that it no more needs Middle East oil and energy, a tendency towards de-alignment from the region prevailed in Washington. In the meantime, Middle Eastern nations realized that they have to rely on themselves and their neighbors for their safety and security and outsider powers are not trustworthy.

United Arab Emirates was even the first country in the region to acknowledge the new strategic formation in the region and that geopolitical strategic texture of the Middle East required new definitions. The UAE sustained its neighborly relationship with Iran, Qatar and adopted a balanced relationship in the Persian Gulf region. Saudi Arabia was late but still thoughtful to adopt and return its strategic priorities from within the Middle East.

China factor

It is needless to re-emphasize China’s role in what came to be known as the most important event of the Middle East in recent decades. China owes its Belt &Road initiative to Iran when back in 1996, in a major strategic development in Central Asia, 12 head of states and representatives from 50 nations attended the inauguration ceremony of the Mashhad-Sarakhs-Ted Zhan (Trajan) railway in Northwest Iran. The 165 km railway is crucial link to revive the ancient Silk Road.

By this, I intend to convey that the notion of Asia-nation was a basic characteristic of Iran’s foreign policy since its inception over four decades ago.

However, both Saudi Arabia and Iran are crucial to the success of the Belt and Road project and Global South policy of major countries in Asia and developing nations. It is clear that the United States and the West deliberately created conflicts between major strategic and energy players in the region. Any worthy development projects required peace, security and stability before it, can be implemented. Peace is the major factor for investments by any country. 

China has experienced a persistent growth rate for the last three decades. This, together with the highest population has made China the most popular destination for major oil and gas producers in the Middle East and elsewhere. As such Iran and Saudi Arabia have well realized that they need to seize the moment and cooperate in order to enlarge their market in China, as well as other emerging countries in ASEAN region. For the two Middle Eastern superpowers, it is “now or never” moment. 

Saudis and Iranians will have competition and rivalry, but surely no enmity and hostile policies towards each other and the region. We are at a win-win game.

De-globalization

As mentioned earlier, the US economy is in trouble. The country’s Federal Reserve keeps printing money for which there is no solid backing except that of hegemonic myth. Military strength and access to a system commonly known as SWIFT that allows transactions once the US government approved. Swift is basically nothing but a code that everyone dollar- denominated transactions has to be identified with. 

Once Saudi Arabia and OPEC member countries decide to sell their oil (or gas) in Yuan or other internationally convertible currencies, US dollar will render irrelevant. By that I mean irrelevant to the extent that they can apply sanctions to any transactions that Washington voted against. Dollar was a privileged currency or a currency of convenience when America bought most of the oil. Now that Asia imported most of the oil, the buyers decide the medium of transactions.

Diversion from domination of dollar as medium for oil trade into a diverse basket of currencies has been oil producing and exporting countries' intention for about 70 years. This is translated into termination of dollar tyranny that will eventually lead to decoupling of many more commodities and goods or services from US manipulations.

As such de-globalization is here to stay and most notably in oil and gas trade.

 Iran-Saudi axis of oil cooperation has long been envied by major international market participants and rivals. As the era of the Seven Sisters comes to an end, the next phase of oil power is shaping up as The Seven NOCs.

National Oil Companies of the global south will determine the future path of oil markets. The Riyadh-Tehran deal will not only strengthen the Middle East geopolitical texture in the world but the entire Eurasia will be farther incorporated into a single market and single currency mode. US maximum pressure tactics hurt Iran a lot, but the country made the best of it. Once the US dollar dominated oil markets vanished, Iran will be back in the market with full force.

Now addressing Iran and Saudi Arabia specifically, economies of the two countries are exceptionally complementary. By that, I mean although both economies are producers and exporters of oil, Iran’s economy is vast and expansive. Iran produces a diverse variety of consumer products and services.

 However, the Iranian economy suffers from insufficient investment due to severe and long years of sanctions. As such economies of the two countries are complementary. 

G20 was first formed in September 1999. The group was in essence consisted of 20 most powerful nations of the world. However, G20 has begun to shrink and is losing reference to the realities of changing world order and de-globalization process. In a new multipolar world order, rules-based Northern Atlantic hegemony has lost reference. 

The Shanghai Cooperation Organization in which Iran’s membership is accepted and Saudi Arabia is in the process of joining, global south with over 70 percent of oil and gas resources and major demand hubs, Iran and Saudi Arabia as well as the UAE and other players in the Persian Gulf region will have to play a pivotal role in shaping Asian Century. In fact, OPEC is a model for cooperation. There have been rivalries and hostilities amongst members of the organization. However, some of the most important agreements that helped support and strengthened the international oil market was taken during those difficult times.

The China-brokered rapprochement between the Islamic Republic of Iran and Kingdom of Saudi Arabia is seen as a milestone in political map of the Middle East. Syria’s relationship with its neighbors is on the normalization path, too. Middle East is on the right path.

Iran Petroleum