In the Gulf game of nations, Iran and Saudi Arabia are well matched

Iran and Saudi Arabia are longstanding rivals — like Barcelona and Real Madrid — but they are now playing according to new rules policed by the great powers.

Iran, freed from most international sanctions on 16 January, and Saudi Arabia, the world’s leading oil exporter, are well-matched rivals.

Both have enormous resources. Saudi Arabia has more than $600bn in savings, produces 10.2m barrels a day (b/d) of oil and enjoys the largely unqualified backing of the US.

Iran, with the world’s second largest gas reserves and fourth largest oil reserves, has more than 80m people, a diversified economy and could get up to $100bn in frozen assets following the relaxation of sanctions.

The kingdom’s got the Middle East’s largest economy. Iran’s number two.

If they were football teams, Saudi Arabia would be Real Madrid; Iran, Barcelona. Both can’t win the Spanish League every year. But you can be certain they will never be relegated.

Like that between the two Spanish cities the teams represent, the rivalry between Iran and Saudi Arabia is the product of many factors. As a result of the nuclear deal with Iran, the inescapable competition between the Middle East’s two superpowers can now be directed towards constructive ends.

In economics, competition encourages specialisation in production and stimulates trade. Commerce in goods and services promotes peaceful human interaction. People that trade with each other tend not to want to fight each other, though there’s no guarantee this will always be so.

Constructive rivalry also leads to innovation and efficiency.

So the end of nuclear-related sanctions — and of the threat of an attack on Iran’s nuclear facilities which has clouded regional prospects for a decade — clears the way for competition between the Saudi kingdom and Iran’s republic that should be good for both.

Since the Iranian revolution of 1979, there have been two apocalyptic visions of the region’s future. One was the collapse of the Saudi monarchy and its replacement by a populist regime. The other was the disintegration of Iran’s revolutionary government and the restoration of a Persian dynasty.

Neither have come to pass.

The long-term significance of the deal between Iran and all five UN Security Council members plus Germany that led to the relaxation of sanctions last week is not rooted in nuclear weapons or oil.

It is that it indicates that the rule of kings, emirs and sultans in Arabia and of ayatollahs and mullahs in Iran will indefinitely continue.

But it is naïve to expect Iranian revolutionaries to root for the Saudi monarchy or for tribal Arabians to applaud Tehran’s republicans. Both will persistently assert that their system is better, more efficient, more humane and more consistent with God’s message.

The rhetoric exchanged by Riyadh and Tehran, therefore, will continue to be occasionally lurid and this will sometimes be reflected in their actions. But they are now playing according to rules the world’s great powers will police. There will be cheating. But you’d expect that in life as much as you would in sport.

Lower oil prices for longer than expected, the consequence of Washington’s desire to normalise relations with Iran, will hurt both sides of the Gulf. But it’s not an existential issue. Saudi Arabia will dip into savings, borrow and privatise to finance its budget gap. Iran can ramp up oil exports to offset the impact.

It’s unclear in January 2016 which will emerge stronger in 2020. But it’s certain both will still be the region’s two largest economies. They could even be in better economic shape than they are now. It’s amazing what constructive competitive can do.

Those with bigger problems are weaker Middle East nations and outsiders that fail to understand that the rules of the Gulf game of nations have changed.

It would be a mistake for other Middle East states to over-identify with one or other of the big Gulf rivals for sectarian, ethnic or ideological reasons.

A sounder approach has been defined by Dubai, a part of the UAE and a firm supporter of the federation’s anti-Iranian posture. And yet it, is ready to benefit most from the end of Iranian sanctions. Oman built political and economic relations with Iran whilst staying loyal to the GCC and the Arab League.

Both will gain from the dividend the end of Iranian sanctions will deliver. God loves the righteous. Fortune favours pragmatists.

There are hazards for outside powers. President Obama and the US, charged with being biased towards Iran and secretly conspiring with Israel to weaken Arab states, won’t lose much from ending Washington’s impasse with Iran.

But others could

There are no easy choices in Middle East affairs. The US and Iran, defying domestic critics, made theirs last July when the Joint Comprehensive Plan of Action (JCPOA) was signed.

It’s everyone else’s turn now.