Iran-Saudi deal boosts hopes for more Gulf cooperation

Iran's resumption of diplomatic ties with Saudi Arabia has raised the Islamic republic's hopes for improved security, economic and trade cooperation with its neighbours and within the Gulf.

Riyadh and Tehran cut top-level engagement in 2016, but their foreign ministers on Thursday signed the Beijing Agreement in China's capital, after senior security officials from both Gulf powers concluded its terms last month.

Longstanding regional dynamics now look set to be reshaped.

Promoting regional harmony is a declared objective of the China-brokered deal, which emphasised the importance of boosting bilateral cooperation to ensure "security, stability and prosperity in the region", according to the joint statement released after the Beijing meeting.

Hopes have been raised for a negotiated resolution to Yemen's long-running conflict, where Saudi Arabia has led a military coalition supporting the internationally recognised government since 2015 and Iran-backed Houthi rebels control swathes of the country's west.

The Yemen conflict has killed hundreds of thousands of people directly or indirectly, and left millions on the brink of famine, according to the United Nations which calls it the world's worst humanitarian crisis.

Tehran and Riyadh know that "for seven years, this spirit of confrontation has caused irreparable losses to the Muslim world, to the region as well as to their two nations", said Iranian analyst Heshmatollah Falahatpisheh, a former head of parliament's national security committee.

Resumed Iran-Saudi ties give Tehran hopes of closer relations with its Arab neighbours, two of which have normalised relations with Israel, in agreements known as the Abraham Accords.

"Detente with Saudi Arabia allows Iran to avoid the formation of a united regional front at a time of heightened tensions with the United States and Israel," said Ali Vaez, from the Belgium-based war monitor International Crisis Group.

Iran's Supreme Leader Ayatollah Ali Khamenei has also stated an intention to increase ties with Asia and further distance Tehran from Israel and the United States.

The deal could impact global energy markets as both countries are major oil and gas producers and where any disruption to production typically leads to price fluctuations.

"There are huge areas for cooperation in the oil, gas and petrochemical sectors between the two countries," said Keyvan Kashefi, a board member of Iran's Chamber of Commerce.

With the prospect of increased regional cooperation, Iran is hoping to better manage the economic troubles it has faced since biting US economic sanctions were reimposed in 2018, when then-president Donald Trump withdrew Washington from a landmark nuclear deal with Tehran.

"Developing economic and trade cooperation" with Saudi Arabia is one of Tehran's objectives, Foreign Minister Hossein Amir-Abdollahian said after Thursday's Beijing meeting.

Rampant inflation and record depreciation of Iran's currency the rial against the dollar have blighted its economy.

Saudi Finance Minister Mohammed Al Jadaan last month flagged potential investment in Iran.

He said there were "a lot of opportunities" in Iran, and that he couldn't see any reason to prevent investments taking place between the two Gulf heavyweights.

Resuming international flights should also increase religious exchanges between Iran and Saudi Arabia.

Another point of the agreement is the "resumption of umrah" by Iranian pilgrims following Riyadh-imposed limitations for the past several years.

The umrah is a pilgrimage to the holy city of Makkah in Saudi Arabia that can be taken at any time of the year, in contrast to the hajj, which takes place on dates according to the Islamic lunar calendar.

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