Can Arab Gulf states entice Iran to cut a new nuclear deal?

As talks inch forward in Vienna between the West and Iran over reviving the accords constricting Iran’s nuclear program, a breakthrough may come from an unlikely place: Arab Gulf states.

Six years after denouncing the nuclear deal negotiated during the Obama administration for failing to address Iran’s activities in the region, the states are encouraging Tehran to return to the Joint Comprehensive Plan of Action (JCPOA).

To do so the states, some of whom like Saudi Arabia have waged proxy wars with Iran, are embarking on a separate diplomatic push to induce Tehran to abandon both its nuclear pursuit and what they see as its interference in Arab states.

In their push for regional dialogue and cooperation, Arab Gulf states believe they have the most to offer Iran to entice the hard-line government to compromise at the negotiating table.

Behind the Gulf Arabs’ shift are several considerations: the perceived failure of the Trump administration’s yearslong “maximum pressure” policy toward Iran, with which the Gulf states were aligned; a consuming war in Yemen; and concerns that ongoing insecurity and the risk of conflict not only threaten the Gulf states’ national security, but are bad for business.

But the states’ transformation from nuclear talk holdouts to active participants was also made possible, say Gulf insiders and analysts, by the fact that this time around, the United States included them in the process.

Being briefed by the Biden administration and Europeans has allowed Gulf states to be secure in pursuing their own dialogue with Iran to cover areas a nuclear accord could not.

The Gulf states say they have consensus demands for Iran: the immediate de-escalation of Sunni-Shiite sectarianism; ending the supply of ballistic missiles to its militia proxies; curbing its interference in the internal affairs of Arab states; and halting its pursuit of weapons-grade uranium. 

In return, Gulf states are offering an assortment of economic and financial relief measures, as well as trade and investment opportunities, that could lead to the speedy influx of tens of billions of dollars into economically devastated Iran, with hundreds of billions of dollars in long-term potential.

“What Arab Gulf states want and what they can offer is well known,” says Emirati political analyst Abdulkhaleq Abdulla. “At the end of the day, the important question is: What does Iran want from us?”

Diplomatic flurry

The flurry of diplomatic activity between Gulf countries and Iran has picked up as talks between the international community and Iran progress in fits, starts, and slowdowns in Vienna.

On Monday, Iran’s foreign minister noted “good progress” in Vienna due to “efforts made by all parties to reach a stable agreement.”

While the U.S. has welcomed the “modest progress,” it continues to push for a hard deadline to return to the accord within “weeks,” to prevent Iran from reaching a threshold ability to produce a nuclear weapon from sufficiently enriched uranium.

Iran’s government rejects imposing any deadlines or an interim agreement.  

Yet talks between Iran and the Arab Gulf states are flourishing:

• Iran-Saudi talks toward a rapprochement are entering their fifth round in Iraq next week.
• On Monday, as part of a Gulf tour, Iranian Foreign Minister Hossein Amirabdollahian arrived in Muscat to discuss regional de-escalation with Oman, a traditional mediator between Tehran and Washington. Separate Qatar-Iran talks are ongoing.
• In December, the UAE national security adviser visited Tehran and met with Iranian President Ebrahim Raisi.

Economic opportunity

For Iran, the Gulf’s financial and economic opportunities are unmatched.

Dubai is a significant export hub for Iran, a critical lifeline to the global economy amid financial and trade sanctions. The UAE is currently Iran’s second-biggest trading partner with $16 billion in trade in 2021, a figure that is expected to reach $18-$20 billion this year.

“The UAE and Gulf countries can offer a lot to Iran, which economically needs a lot of tangible things the Gulf can provide. We can increase trade, we can ease financial restrictions, we can exchange goods it desperately needs,” says Dr. Abdulla, the Emirati analyst.

Access to Saudi Arabia, the largest single market in the Arab world with a $782 billion GDP, would also be an immediate boon to Iranian exports.

Among other potential benefits to Iran:

• The exploration and extraction of natural gas from concessions that have been locked in legal disputes between Iran and a UAE-based firm.
• Sharing of Gulf know-how that could aid Iran’s oil industry.
• Improved COVID-19 response: The UAE and Oman shipped medical supplies and ran humanitarian flights to Iran in 2020; Gulf states are now reportedly offering increased assistance and aid to Iran’s medical sector, pharmaceutical sector, and hospitals.

What’s more, Arab Gulf diplomats say they believe they can offer something intangible that Iran craves: respect as a regional player and an end to isolation in its own neighborhood. 

Increased cost of conflict

The shift in the Gulf states’ posture also follows a six-year period where military action against Iranian-supported Houthis in Yemen and a break-off of diplomatic ties did little to weaken Iran’s position.

Instead, from Syria to Iraq and Lebanon, Iran has become more entrenched and emboldened, with its militias becoming battle-hardened.

“The marginal gains for conflict overall have diminished, especially after the COVID-19 shock affected regional budgets,” says Dania Thafer, executive director of Gulf International Forum.

“The increased cost of maintaining conflict combined with the perceived U.S. disengagement of the region is a strong signal for Gulf states to pursue dialogue to find a new security arrangement,” she adds.

Arab Gulf countries’ bargaining position with Iran is limited by a hard fact: they need Iran too.

The UAE and Saudi Arabia in particular want Tehran to pressure the Houthis in Yemen to engage in a cease-fire and dialogue to end the Saudi-led war in Yemen, Gulf diplomatic sources say.  

In addition, Riyadh and, to a lesser extent, Abu Dhabi are concerned about Iranian proxy Hezbollah’s ongoing domination of Lebanese politics and state institutions. They are also competing with Iran for influence in Iraq and Syria.

Then there is the prospect of armed conflict between either the U.S. or Israel on one side and Iran on the other. The UAE and Oman lie directly in the path of missiles; Abu Dhabi is reportedly concerned that instability and conflict would sink its service-based and globalized economy, which is reliant on the free travel of people and finances.

There is also an inherent time limit on the Saudi-Iran and wider Gulf talks: should the JCPOA be revived and sanctions lifted first, Gulf states will lose a lot of their bargaining leverage with Tehran, analysts say.

Despite the limitations, Gulf diplomats say their offer of economic opportunities is the best offer Iran can get and would be a huge windfall for Tehran. The question remains how Iran will respond.