Iranians Try to Exploit Saudi Prince's Crisis as Sanctions Loom

(Bloomberg) -- “This Is How Bin Salman Confessed,” the headline in Iran’s pro-government Khabar Online declared. The accompanying cartoon showed a giant finger pushing Saudi Arabia’s crown prince and de facto ruler toward a confessional box, blood-stained sword in hand.

From the pages of state-controlled newspapers to north Tehran’s dinner party circuit, Iranians have had a field day since the killing of Saudi government critic Jamal Khashoggi stirred unusual discord between their country’s greatest rivals: Saudi Arabia and the U.S.

With American sanctions on Iran’s oil exports set to resume on Nov. 5, the Islamic Republic has been bracing for the worst. An economic crisis that has hit the currency and fueled inflation is likely to deepen, and Iranians were expecting their own government, traditionally pilloried by U.S. and Saudi leaders alike, to dominate the headlines.

Many could not resist the opportunity to score points at the expense of Prince Mohammed bin Salman, who presents himself as the modernizing face of Saudi Arabia, and backed Donald Trump’s decision to abandon the 2015 nuclear deal. Iranian President Hassan Rouhani called the killing, carried out at the Saudi consulate in Istanbul, an “organized murder” that could not have taken place without U.S. knowledge.

“It’s really revealed Mohammed bin Salman’s true colors -- it was a show for the West, this idea of reform and all his talk of change,” said Ehsan, a 29-year-old graphic designer who didn’t give his surname because of local sensitivity over speaking with foreign media. “While both countries have problems, there’s no doubt to me that Saudi is worse on human rights and freedoms. Democracy in Saudi Arabia is probably a lot worse than it is in Iran.”

Loss of Trust

The 33-year-old heir to the Saudi throne has allowed women to drive and permitted concerts and cinemas, loosening the Sunni Muslim monarchy’s tight social restrictions. Those reforms have been undercut, however, by domestic repression and a rivalry with Shiite Muslim Iran that has precipitated a costly war in Yemen and a break with neighboring Qatar, which it accuses, among other things, of being too close to the Islamic Republic.

Prince Mohammed used an investment conference in Riyadh last week to try to quell international outrage over Khashoggi, an insider-turned-critic who’d been living in self-imposed exile, vowing to hold the culprits accountable. But having accrued massive power, the prince is struggling to convince the world he knew nothing of what even the Saudi prosecutor came close to calling premeditated murder.

American and European leaders, once enthusiastic about change in Saudi Arabia, have distanced themselves from MBS, as the prince is known, while U.S. lawmakers are pushing for an end to arms sales.

The controversy has caused jitters on global oil markets and created a dilemma for Trump, who wants oil prices under control as the U.S. nears crucial midterm elections. The U.S. has been reluctant to grant waivers to countries that continue purchasing Iranian crude, as it pressures Iran’s rulers to roll back regional ambitions at odds with its own.

After initially hinting it would use its market clout to respond to any punitive measures over Khashoggi’s death, Saudi Arabia, the world’s largest oil-exporter, has pledged to supply enough barrels to compensate.

“There is some level of loss of trust between the U.S. and Saudi Arabia,” said Clement Therme, a Bahrain-based research fellow at the International Institute for Strategic Studies.
Tensions “could push the U.S. to give more waivers for Iranian oil because of the concern that prices would rise and be out of control.”

Curbing Iran

Trump announced in May he was exiting the 2015 accord that curtailed Iran’s nuclear program in return for an easing of sanctions. While European countries, Russia and China have remained in the agreement, Iran’s oil exports have slumped more than 30 percent as buyers shun its barrels to avoid being cut off by U.S. banks.

Fallout from the killing has been limited, however, by the U.S. desire to curb Iran’s regional influence.

“The U.S. believes it needs Saudi to control Iran, so relations won’t be impacted by this crisis,”said Diako Hosseini, director of the world studies program at the Center for Strategic Studies in Tehran.

As a way out, Trump could pressure Saudi Arabia to ease its embargo against Qatar, an ally of both the U.S. and Turkey. He also could push Riyadh to end its war in Yemen, which has helped trigger the world’s worst humanitarian crisis. Either might represent progress for Iran, which is battling Saudi Arabia in proxy conflicts from Yemen to Lebanon to Syria.

Even if Iran doesn’t score any substantial wins, the Khashoggi episode looks set to become a feature in the Middle East’s propaganda war.

Iran “will bring this up during any future dispute or when rivals try to paint them as a rogue actor,” said Peter Salisbury, senior consulting fellow in the Middle East program at Chatham House.

©2018 Bloomberg L.P.