Key fact

Trade between the GCC states and Iran peaked at about $16bn in 2008

Source: MEED

Its member states may be reluctant to admit it, but the GCC owes its existence, in part at least, to its only non-Arab neighbour, Iran. And, as the recent leak of US diplomatic cables by the whistle-blowing website Wikileaks shows, the relationship between the council’s member states and the Islamic republic is just as complex today as it was two decades ago.

It would be a major economic disaster for the GCC states if there was an attack in the Gulf

Jean Francois Seznec, Georgetown University

The GCC was formed in 1981, two years after the Islamic revolution swept Shia cleric Ayatollah Khomeini to power in Iran, and less than a year after Iraq crossed its neighbour’s border, initiating the eight-year war between the two countries. The conflict disrupted trade in the Gulf for much of the next decade.

GCC trade with Iran
  GCC Population (2009) GCC GDP  (2009) GCC total bilateral trade with Iran (2009) ($m)
Bahrain 1.04 24 100
Kuwait 3.7 146.3 417
Oman 3.16 67.8 487
Qatar 1.6 83.9 108
Saudi Arabia 25.4 477.3 1,030
UAE 8.19 223.9 9,703
Iran 43.9 330.6
GDP=Gross domestic product. Source: IMF

Common threats to Gulf states

Although regional leaders today argue that the creation of the council was based on common economic interests, diplomats from member states privately concede it was equally due to common threats. In 1984, the GCC states agreed on the formation of a 10,000-man strong unified defence unit, the Peninsula Shield Force (PSF) in response to the perceived security risks, posed by both Iran and Iraq to the region.

The Gulf states … are better at cheque-book diplomacy, while Iran is better at statecraft

Emile Hokayem, International Institute for Security Studies

At the time, the threat posed to Sunni rulers by a Shia state with a religious leader who questioned the legitimacy of the Gulf ruling families outweighed that of Saddam Hussein’s Baathist regime. The Gulf states also made considerable financial contributions to Iraq’s military campaign for the duration of the war.

During the 1990s and early 2000s, the regional security focus shifted back to Iraq after its invasion of Kuwait. Iraq’s purported weapons of mass destruction programme led the US to invade the country and depose Hussein in 2003.

Between 1989 and 1997, Iran’s new president Ali Akbar Rafsanjani made considerable inroads towards improving relations with the GCC states, abandoning talk of regime change in the region and pushing new economic ties.

Rafsanjani’s successor, Mohammad Khatami, also moved to boost ties between the two sides after his appointment in 1997. Bilateral trade between the GCC states and Iran gradually increased over the next decade, peaking at about $16bn in 2008 in spite of the election of the firebrand Mahmoud Ahmedinejad as president, seen as less palatable to GCC states, in 2005.

As the movement of goods have increased between GCC states and Iran, so too have formal relations. Both sides have shown interest in recent years in working on agreements, which would allow Iran to trade more freely within the council’s common market.

This would benefit Iran in particular, as it has become increasingly dependent on the region for imports and exports made impossible from elsewhere by US and UN sanctions. The emirate of Dubai is a key trading hub for Iranian businesses. Bilateral trade touched $7bn in 2009, more than 60 per cent of total Iran-GCC trade for that year.

But the GCC states have not forgotten that just over the Gulf from the Arab peninsula lies, if not an outright enemy, a major source of potential disruption. Furthermore, the country’s population dwarfs that of the GCC combined and that is not to mention the disparity in the economies.

Iran’s influence in Iraq and Lebanon in remains a serious concern for regional leaders. Saudi Arabia, which has invested precious political capital in Lebanon to little avail in the face of growing Iranian influence, wants to ensure security on its border with Iraq.

Meanwhile, Iran’s continued presence on the UAE islands of Big Tunb, Little Tunb and Abou Moussa, which it occupied in 1971, remain a key sticking point in joint GCC-Iran relations. Tehran’s refusal to relinquish the islands is seen by most regional leaders as symptomatic of its true attitude to its neighbours.

As US rhetoric over the nature of Tehran’s nuclear programme has grown louder over the past decade, so too have the concerns of its Arab neighbours over the balance of power in the region, analysts and diplomats say.

Private opinions on Iran

“The general perception in the Gulf today is one of Iran without the natural buffer that Iraq formed,” says a former senior Western diplomat. “There is this idea that Iran is developing nuclear arms capabilities, and that it wants to use that to shift the balance in its favour. However misguided, that is pretty much the view.”

By and large, the region’s leaders have struck a conciliatory tone with Iran over the past two decades, but as the recent leak of US diplomatic cables have shown, public diplomacy has not been matched by private opinion.

One of the cables quotes the Saudi ambassador to the US, Ali Al-Jubeir, as citing the country’s ruler King Abdullah bin Abdulaziz calling to “cut off the head of the snake” of the Iranian nuclear programme.

In private conversations, US diplomats also claimed that Abu Dhabi’s crown prince, Sheikh Mohammed bin Zayed, had urged military action against Iran’s “young and aggressive” president Ahmedinejad.

Meanwhile, most GCC members have been supportive of US-led sanctions against Iran under Ahmedinejad, despite general council policy to concede to UN-led sanctions and to resist additional US-led trade conditions.

Lack of strategy across the GCC

“The difficulty for anyone outside the region, or indeed for the Iranians, is cutting through what is being said publicly and privately,” says the former diplomat. “And for that matter working out if there is a coherent strategy or policy across the GCC. Realistically, I don’t think there is one.”

When senior members of the council do speak publicly on Iran, it is usually to defend regional plans for nuclear energy and to conflate the question of Iranian nuclear arms with Israel’s alleged weapons programme, he adds, while discussing the question of the UAE’s sovereignty claims.

In December 2010, the UK-based International Institute for Security Studies (IISS) held its seventh annual event in the region, the Manama Dialogues, in Bahrain.

It was the first meeting for regional diplomats following the leaking of US cables, but yielded little change in the public positions of GCC member states on Iran.

Foreign secretary after foreign secretary affirmed Iran’s right to a nuclear programme and implored Tehran to work with the UN to resolve the issue of armaments. Iran’s then-foreign affairs minister Manouchehr Mottaki said the GCC states had nothing to fear, imploring regional consensus on security.

The question for many analysts at the conference and afterwards was what was happening behind closed doors. What was certainly not happening, says Emile Hokayem, a senior fellow at IISS, was any real push for military action against Iran.

“What we got from WikiLeaks is not policy, he says. “It is posturing. What was missing was the context in which this happens. The Gulf states are worried that their interests will not be served; that the issue of Iran will drop off the radar. I don’t think that there is real appetite for war.

“It would be costly economically, in lost trade and the cost of transportation through shipping,” he adds.

“The Gulf states worry about the fallout of conventional or asymetrical warfare. If you look at the map of the Gulf, the major economic centres for most of the GCC states are all on the Gulf coast.”

Jean Francois Seznec, a professor at the US’ Georgetown University and an expert on the region, agrees. The leaked cables have to be seen through the lens of the diplomats who sent them, whose Washington audience would lap up anti-Iran rhetoric, he says.

“It would be a major economic disaster for the GCC states if there was an attack in the Gulf,” he says. “I still think that the Gulf states do not want a direct attack on the Gulf, but they would like to see very much to see regime change in Tehran.”

Meanwhile, both Seznec and Hokayem agree with the former diplomat on the lack of a common GCC position on Iran. Each country has a separate set of concerns and links with Iran, and regional security integration has not been a major GCC success.

Hokayem, cites the lack of success of the PSF, particularly during the invasion of Kuwait, and fitful progress on joint projects like an integrated early warning system or joint air defence initiative.

The chances of greater security or economic ties with Iran are also slim. A key regional aim for Iran is the indigenisation of security forces, while the Arab states are more than happy to let foreign powers keep military bases on their land, while building infrastructure and diversifying their economies.

Future ties with Iran

“[Tehran] is focused on physical and regime security,” Seznec says. “The Gulf states have become major economic players. They have tourists here, they have expatriate workers. In Arab globalisation, foreign military bases mean that if something happens then there are troops here to help out.”

The future for GCC-Iran relations is likely to be one of slow growth in trade, while Arab countries cross their fingers and hope for new, more moderate, leadership in Tehran, banking on Western backing to maintain the status quo.

“We have seen motions of diplomacy in the past and we will see statements of good intent,” says Hokayem “But we will not see any substantial developments. As long as the US is willing to provided regional servicing, I don’t see any major regional power shift.”

Meanwhile, he says, the Gulf states, and Saudi Arabia in particular, may need to improve their own relations outside the region and work on a concerted regional approach to their neighbour rather than bemoaning the loss of Iraq and Lebanon to Iranian influence.

“The Iranians know how to play nasty,” Hokayem says. “The Gulf states don’t know how to do that. They are better at cheque-book diplomacy, while Iran is better at statecraft.”