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The China-brokered diplomatic breakthrough between Iran and Saudi Arabia has caught the world by surprise. It’s good to have two Gulf archrivals restore their diplomatic relations that were suspended seven years ago. And it’s great for the two countries to agree to sit down and talk about issues that have pitted them and their regional allies against each other for several decades now. Saudis want to focus on economic development and the Iranians need an economic lifeline. Less security conflicts help both.

While the proof is in the pudding, China stepping up on the diplomatic ladder and playing the strategic role that its massive economic influence allows it to perform is significant. Both Iran and Saudi Arabia find in China a neutral partner with whom they have growing business ties and energy contracts. China’s own practiced approach for economic cooperation even with territorial rivals provides a tested roadmap for rival Gulf powers to follow and focus on economic development over conflicts.

Peace in the region also serves Pakistan, which has brotherly relations with the three parties involved as well as with other countries across Middle East and North Africa. If Riyadh and Tehran are able to build on this pact (a GCC summit is reportedly being hosted by China later this year), it may positively impact Central and South Asia, too. For instance, regional countries may find in Afghanistan opportunities for peace and economic development instead of proxy-wars. Even India may choose to go with the tide and pursue meaningful diplomacy on border-related conflicts with Pakistan and China.

While several commentators have labeled China’s mediation in the Saudi-Iran conflict as a serious setback for the US interests in the region and its broader soft power, the deal has been welcomed by the US government (albeit with some qualifications). It remains to be seen if the dominant perception in the analyst community that the US is losing the region, or that it is being trumped by China in the Middle East just as it lost influence in Africa, stands the test of time. Right now, there are many ifs and buts.

Look deeper and it appears that the US has also gained something out of this deal. For instance, the Americans have been trying hard to end the Yemen war – now both Iran and Saudi Arabia have reason to lower (or end) their direct and indirect military confrontations in that country. With China playing the peace broker, Iran will be under pressure to moderate its policies and work with the international community to restore the suspended ‘2015 Iran P5+1 Nuclear Deal,’ something which serves US national interests.

In addition, while China has rising economic cooperation in the Gulf region, it is not yet in a position to replace the US as the Saudis’ and Emiratis’ chief defense partner (provider of arms, troops, training, strategic support). If the US scaled back its military clientele and presence in the region, China may be expected to fill that void, resulting in conflict with one Gulf power or another. With its lower security footprint, US may be able to exercise more economic leverage on Saudis and others to get what it wants.

Where the US may face future challenges is in convincing countries beyond its core G7 allies to reduce their economic dependence on China. The growing US-China ‘great power competition’ is gradually morphing into a competition between global democracies and autocracies. The American soft power may not be dead, but it is more focused, targeted these years, leaving many countries high and dry. This leaves ample room for China to leverage its economic footprint for strategic purposes. With an expanding global influence, however, comes the risk of military entanglements. The US has learnt the hard way!


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