Economy : Weapon of Saudi Arabia in the face of Iran


International confrontations and conflicts are no longer limited to the political and military sides, but economic weapon or economic boycott has become today more destructive in the confrontation between the countries and a very effective weapon in controlling its manner .
Experts defines to the economic boycott as systematic rejection , with voluntary abstention about commercial exchange and prevention of the import from the target country and the freezing of economic ties with a certain country, to exercise pressure on it to respond to specific demands, such as changing their positions or policies towards some of the issues, such as human rights, or ending the occupation of the land, or stop the aggression on the country.
States resort to the use of economic boycott to force the States to give the concessions at the level of politics or economy for other certain goals, which means that either the latter was punished because of doing unacceptable work so they resort to the punishment to bring it back to the right path .
Saudi-Iranian model of boycott
Tension has been for along time controlling on Saudi relations-Iran and this tension was taking political and diplomatic shape, but with the development of the confrontation between the countries , the political weapon is no longer the only solution , but the economic dimension must be used in the game, so these tensions definitely started to take an economic form, after the two sides exchanged to impose punitive economic measures.
It is no secret that the war which was led by Saudi Arabia to maintain its market share and that led to the decline of oil prices to record levels, which puts scenarios for the future of the oil , and Iran was among the countries that have been affected by the erosion of oil prices, and its treasury was seriously affected , but now Tehran intends to increase its oil production by 500 thousand barrels per day post sanctions, and by other 500 thousand barrels a day shortly thereafter, but the question which we responded to it in previous articles, would it be of the amounts of oil pumped by Iran a positive effect on the Iranian economy?
The US “Foreign Affairs” magazine said that the most important element in the conflict between the two regional powers is the economy , and went on saying that the Saudi Arabia prefers to confront Iran in the arenas in which it has major features, including the oil market.
the magazine adds : “Even if the price of oil was at its lowest level for 11 years, Saudi Arabia still continue to pump large quantities of oil in the market.” .
The magazine concluded by saying, “On the other hand, Iran is unable of taking such steps in the light of the high level of inflation and unemployment in the country, which respectively reached to 16.2% and 10.4%, and the price of oil in Iran should be higher than in Saudi Arabia in order to achieve balance in the budget.
Saudi Arabia today took upon itself to confront Iran economically and politically in a decisive way , to put an end to the growing role of Iran in the region in general, and Saudi Arabia in particular.
It can be summed up some numbers and statistics of the boycott by Saudi Arabia and Gulf countries on Iran:
• The volume of trade exchange between Iran and Saudi Arabia has reached between one hundred and two hundred million dollars, and most of it are consumer goods such as caviar and saffron, nuts and sweets and luxurious carpets.
• Saudi Arabia stopped air traffic and trade relations with Iran.
• On the private sector level, the Saudi billionaire, Prince Alwaleed bin Talal, said that his holding company abolished the study of all projects and investments in Iran.
• A widespread popular campaign in Saudi Arabia has began for a boycott to the Iranian goods,especially   consumer goods ones , while a large number of businessmen responded to these campaigns, and a lot of stores in Riyadh and other Saudi cities started working in the removal of Iranian goods from its shelves.
• Emirates took more tough position where it reduced its diplomatic representation to Iran, for the same reason, in what was considered by observers as a threat to the trade over $ 17 billion a year, Iran is seeking to increase the rates of pre-2011, where they exceed $ 23 billion annually, which is counted a threat to the trade balance for Iran, which is urgently needed of it in the light of the deterioration resulting from sanctions procedures on its economy , and therefore observers see that Iran will lose the Arab Free Trade Zone that it use it in operations of trade , commercial exchange and shipping .
• Bahrain supported Saudi position, which withdrew its diplomatic mission in Iran, so that the Kingdom threaten Tehran’s efforts to strengthen cooperation with Bahrain in the economic field , through agreements signed between the two countries on trade and encouragement of investment and avoidance of double taxation .
• Economists say that the boycott of these goods will not be influential on the Saudi economy, due to the availability of it in other countries and in same quality, stressing that Saudi Arabia does not depend on Iran economically and there is no direct cooperation relations between the two countries.
• Observers sees that Riyadh, in the economic conflict, is in need to neighboring countries, noting that the economic relations and trade exchange between the two countries is a modest that the data indicate that the trade volume reaches by US $ 500 million and indicators show that the balance of trade between the two countries has achieved in the period between 1996 and 1999 a surplus in favor of Saudi Arabia by $ 579.6 million riyals in 1996, declined by 58.8% in 1997, to hit 238.3 million riyals. The year 2001 witnessed a reduction of tariffs from 12 to 5% by Saudi authorities , which led to the rise of direct trade with Iran, while in 2007,  the volume of trade between Saudi Arabia and Iran reached its peak , reaching 3.76 billion riyals.
• There are more than half a million Iranians live in Emirates who are running a huge network of economic activities that will benefit more on the Iranian economy.
• Kingdom is trying to annex Abu Dhabi to its side seeking to strangle the Iranian economy, in addition that Saudi Arabia has the major features in the oil market, even if the price of oil was at its lowest level , noting that al Riaydh can afford the biggest drop in oil prices, unlike Tehran, which mainly relies on oil to finance its budget.
The basic problem with regard to the tension between the two countries is the Strait of Hormuz, which the outbreak of open conflict between the two forces would pose a threat to about 20% of the world’s oil supply, which are daily shipped through the Strait of Hormuz.
So the use of the weapon of economy by Saudi Arabia is not new in terms that it has used it in more than one occasion, and the most important of what was done by King Faisal when he used the economic boycott weapon effectively, in the wake of the 1967 war and the war in 1973, after two days of the outbreak of the First war , that it was announced the embargo of Saudi Oil about Britain and the United States , following the outbreak of war in 1973 leading the oil embargo movement which included the Gulf states, and that embargo had its effect in directing the battle.
Saudi Arabia today, along with the Gulf states and other Arab countries constitute the Arab bloc in the face of Iran’s excesses, and its interference in the affairs of Arab countries, and they used the economic weapon that is considered its superior and striking point, which would have obvious implications for the future in the shape of Arab – Iran relations , and probably will be the beginning stage to isolate Iran politically and geographically and economically for the countries in the region, and to deter its influence and practices on the surrounding Arab countries, especially the Gulf ones.

Rawabet Research and Strategic Studies Center

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