ISTANBUL -- Even before it gets underway, the gathering President Obama is hosting beginning on Wednesday with leaders of the Persian Gulf states is already shaping up as a tense affair. Saudi Arabia and its fellow Gulf states are seething over Obama’s proposed deal with Iran, their bitter regional rival. They fear the deal, which would release Iran from crippling economic sanctions in exchange for limits on its nuclear program, will lay the ground for Iranian adventurism in the region.
These Gulf leaders are likely to demand something substantial as the price for their assent: a formal defense treaty that would bind the United States to come to their aid in event of an Iranian attack.
But that aspiration will almost surely go unfulfilled, say experts, leaving the Gulf states scrambling for an alternate means of security. They are likely to press the Americans to dramatically increase the sale of sophisticated weapons to the region. Some may even pursue their own nuclear weapons programs, potentially escalating the risk of conflagration in a region that is already considered a powder keg.
“Everyone is so nervous about Iran’s intentions,” said Alex Vatanka, an expert on Iran at the Middle East Institute, a think tank based in Washington. “The Gulf Arabs don't feel they are part of the U.S. equation the way they ought to be on this critical question."
The gathering this week in Washington was supposed to ease such tensions, serving as a venue for Obama to reassure jittery Gulf allies that the proposed deal with Iran will not leave them exposed. Obama is set to welcome leaders from the six Arab nations that form the Gulf Cooperation Council -- first at the White House on Wednesday evening, then again the following day at a summit at Camp David.
But the Gulf states have already signaled their displeasure over the context of the proceeding by dispatching lower-level delegations. The most important player, Saudi King Salman, will not travel to Camp David, Saudi Arabia announced, citing the ongoing conflict in Yemen as the reason. The leaders of Oman and the United Arab Emirates said they are not attending because of health reasons.
For Obama, reassurance will not easily be conveyed. The Gulf leaders are cognizant of a looming June 30 deadline for international ratification of his proposed pact with Iran. If the five members of the U.N. Security Council plus Germany strike a deal with Iran by that date, Iran would then be allowed to pursue a peaceful nuclear program under international supervision. Sanctions would be lifted, allowing Iran to eventually resume sales of its oil on global markets -- a vital source of revenue.
The Gulf Cooperation Council, or GCC, represents countries in which Sunni Muslims are dominant. Their leaders express fears that their Shiite-dominant neighbor, Iran, would exploit freedom from sanctions to become an economic and military powerhouse, posing a substantial strategic challenge.
Since its founding in a bloody revolution 35 years ago, the Islamic Republic of Iran has faced myriad constraints on its regional ambitions, not least a long-running war with Iraq, followed by international sanctions which have kept Iran isolated and separated from world markets. Liberated from those sanctions, Iran might finally realize its potential -- a land of 77 million people financed by oil revenues and intent on using military might to project influence.
This is the vision that has the Gulf states intent on some sort of security arrangement with the United States to mollify fears of a resurgent Iran.
“The U.S. will have to come up with a blueprint that says ‘Look, we told (Iran) they can’t go all out in the region,’ and convinces the GCC countries that their security is taken care of,” Vatanka said. “The GCC wants a defense treaty of sorts, but I doubt it is going to go anywhere.”
Speaking on Monday in a conference call with reporters, Obama administration officials said the summit would include an announcement on the architecture for a regional ballistic missile defense system. But that will almost surely not be enough to satisfy Gulf leaders, who are likely to press for something more -- additional advanced weapons systems from the U.S.
There lies another intractable regional dynamic: The U.S. cannot sell further advanced weapons to the Gulf without enraging another crucial regional ally, Israel. Any further sales to Gulf states risks eroding Israel’s military advantage over its rivals in the Middle East.
In practical terms, that means the U.S. might have to relent and sell its Gulf allies the Lockheed-Martin F-35, its most advanced warplane, so far approved for export only to Israel, Japan and some longtime NATO members. (A key asset of the F-35 is, incidentally, the ability to penetrate heavily defended airspace, such as Iran’s.)
Gulf states already buy a lot of American weapons. According to U.S. arms transfer data, the Pentagon has approved arms sales worth more than $85 billion to the GCC states in the past eight years. Just between 2011 and last year, for example, the U.S. sold F-15 fighter jets to Saudi Arabia -- the most modern America offers, after the F-35 -- and missile batteries, Apache helicopters and anti-tank missiles to Qatar. More military orders may follow the summit; U.S. arms sales to GCC states will likely be one of the main focuses of the meeting, Vatanka said.
Saudi Foreign Minister Adel al-Jubeir said the summit will focus on Iran's "aggressive" moves in the Middle East, Saudi state news agency SPA reported Tuesday.
"We see Iranian support for terrorist organizations and facilitating the work of terrorist organizations, so the challenge will be in how to coordinate U.S.-Gulf efforts in order to collectively face these aggressive moves on the part of Iran," al-Jubeir said.
Another effect of an Iranian nuclear deal could be a race towards nuclear weapons by Iran’s neighbors, who fear that civilian nuclear energy will lead to an Iranian nuclear arms program. Saudi Arabia is considering starting its own nuclear weapons program, the Wall Street Journal reported this week.
Iran’s neighbors also worry about Iran emerging as a major industrial and commercial power when sanctions are lifted, but those worries won’t be on the agenda at Camp David, experts said.
If a deal does happen, Iran will be freed from economic sanctions, and about $150 billion in funds that have been untouchable for decades will be released. The Iranian market will open to the world economy for business and investment, and the GCC countries will have a huge economic competitor. But that’s something they will deal with in the long term.
“The Gulf Arab countries, and especially Saudi Arabia, are not overly worried by Iran being released from sanctions, as they feel that it will take between nine to 12 months before any meaningful Iranian oil production can be ramped up and sold,” said Mohamad Aly Ramady, an economist based in Riyadh. “It will take time and a lot of finance for Iran to start competing in this area.”
The bigger problem for Saudi Arabia may not even be in the oil sector, even though Iran would be able to import Western technology to help modernize the oil and gas sector, but in areas where Iran is already more advanced, chiefly the automotive sector.
Iran has ranked for years in the top 15 largest car-producing nations, making 1.6 million vehicles in 2011, more than Great Britain and more than double that of Italy.
With a finalized nuclear deal, Iran’s “massive, hungry market” will open up to the world, and Iranian exports may challenge some of the GCC nation’s emerging manufacturing sectors, Vatanka said.
The return of Iran on the world stage may, however, be an opportunity even for the Gulf countries. That will not be on display in Camp David, but Saudi Arabia has already made moves to open up its economy in preparation for having to compete with a growing giant next door.
The Saudi government announced in April that it would open up its stock market to direct foreign investment on June 15, just two weeks before the deadline for the Iran nuclear deal. With a total capitalization currently about $530 billion, the Saudi market is the largest in the Arab world. It may grow even larger after opening to foreigners; until now, investors outside the GCC have been limited to buying Saudi shares indirectly through swaps or exchange-traded funds.
Iran may soon do the same. Last week Ali Saeedi, deputy head of supervision of financial institutions at the Securities and Exchange Organization of Iran, the country’s market supervisory authority, told the Financial Times that Iran was readying to open its market to foreign investment following the finalization of the nuclear deal.
Tehran’s bourse is smaller than other regional partners such as Saudi Arabia and Turkey, but Iran is working to build a trading platform that conforms to international standards, the Financial Times reported. And while Gulf rulers pressure Washington to get more weapons to fend off Iran, these economic reforms may eventually make those weapons less likely to be used.
“There are two ways to looking at Iran. The GCC can look at Iran as a threat to their economic well-being or they can see it as an opportunity for investment in the Iranian market,” Vatanka said. “If you see much more investment from the GCC in Iran, it could start changing the way they look at each other.”