The Beijing-brokered diplomatic thaw in relations between Saudi Arabia and Iran saw the US sidelined from negotiations and is the latest sign of China's growing influence in the Middle East.
In a joint statement on Friday, Tehran and Riyadh said they had reached an agreement to resume diplomatic relations.
Saudi Arabia cut ties in 2016 after protesters invaded Saudi diplomatic posts in Iran following the execution in the kingdom of a prominent Shiite cleric.
The US appeared to have been caught off guard by the rapprochement.
White House National Security Council spokesman John Kirby said Washington was “not involved” in the mediation process.
“It appears to us that this road map announced today was the result of multiple rounds of talks,” Mr Kirby said.
The NSC said earlier that it had been “aware” of reports of the deal, and hoped it would help end conflict in Yemen and reduce regional tension.
A Saudi-led coalition intervened at the request of Yemen's internationally recognised government in 2015, after Iran-backed Houthi rebels seized the capital Sanaa.
When asked for his reaction to the deal, President Joe Biden did not answer directly. Without mentioning Iran, China or Saudi Arabia, he said: “The better the relations between Israel and the Arab neighbours, the better it is for everybody.”
James Oberwetter, a former US ambassador to Saudi Arabia under President George W Bush, said Riyadh no longer sees the US as a reliable partner and is “perplexed” by Washington.
“We have moved administration by administration, from one party to the next, pulling them one way and then pushing them away, pulling them back and pushing them away,” Mr Oberwetter told The National.
The former US diplomat said China was capitalising on a “vacuum” that the Biden administration had allowed to develop with its “bewildered” policy in the region.
“The US has just sent many mixed signals,” he said.
“China is looking at this as an area of interest. They, like other major powers in the world, want oil to keep flowing in the Middle East so they do not want the Middle East to be in a warring state.”
Ryan Bohl, a senior Middle East and North Africa analyst at the Rane Network risk intelligence company, said it was unlikely Washington would have been able to broker such an agreement because of tension with Iran.
“It's a signal the Iranians are trying to send specifically to Washington, that China’s influence is rising in the region, and that Iran is hoping that China will try to supplant the United States as either a broker of diplomatic processes like these, but even potentially as a security guarantor of countries like Iran,” Mr Bohl told The National.
The Beijing-sponsored talks between Tehran and Riyadh came as Washington ramps up efforts to combat China's global influence.
The Biden administration on Thursday launched its new budget proposal, in which it continued a pivot away from the Middle East and expanded its focus on Russia and the Indo-Pacific region, particularly China.
The budget included about $6.4 billion in spending for the Middle East. In the previous budget, the Biden administration allocated about $7.6 billion in funding to the region.
Mr Kirby said he wanted to “push back hard” on any suggestion that the US is scaling back its involvement in the Middle East.
UN Secretary General Antonio Guterres meanwhile thanked China for hosting the recent talks and for promoting dialogue between Saudi Arabia and Iran.
China’s mediation boosts its regional clout and underscores the “folly” of the Biden administration wanting to pivot from the region, said Behnam Ben Taleblu, a senior fellow at the Foundation for Defence of Democracies think tank.
“As the biggest trade partner of both Tehran and Riyadh, China has been one of the few countries capable of walking the diplomatic tightrope” in the Gulf, he said.
Impact on Saudi-Israel ties
Dennis Ross, a former US diplomat and Middle East co-ordinator under former president Bill Clinton, noted that both Saudi Arabia and Iran have an interest to try to defuse tension.
“Restoring diplomatic relations can help them manage some things — especially Iranian pilgrims to the Hajj — and maybe keep open a communications channel more easily,” he said.
“Do I think it portends a genuine reconciliation? No — Iran has not given up its aim of dominating the region and forcing countries like Saudi Arabia to accommodate their interests.”
Diplomatic progress between Riyadh and Tehran could also herald a way forward in ending the conflict in Yemen.
Talks to build on last year's fragile truce and end the war took place in January.
Jonathan Lord, Director of the Middle East Security programme at Washington's Centre for a New American Security think tank, argued that Riyadh is taking a “balanced, two-pronged approach to dealing with a difficult neighbour”, and that the resumption of diplomatic ties with Tehran may ultimately ease restraints on Riyadh in forming ties with Israel.
“The Saudis are likely expecting that as part of this deal, Iran will reduce lethal aid support to the Houthis and to refrain from attacks,” Mr Lord told The National.
“The Saudis likely believe that having an open diplomatic channel with Iran will buy down the risk of a punitive response from Tehran should the prospect of normalisation with Israel continue to make headlines.”
Simon Mabon, a senior lecturer in international relations at Lancaster University in England, who has written books on Saudi Arabia and Iran, believes China’s role in brokering the talks is a warning sign for the US that also calls into question any future talks surrounding the Joint Comprehensive Plan of Action nuclear deal with Tehran.
Under the 2015 deal with China, France, Germany, Russia, the UK and the US — plus the EU, Iran agreed to limits on its nuclear programme in exchange for sanctions relief. In 2018, the US pulled out of deal, imposed tough sanctions and Iran breached the terms of the agreement.
Efforts to revive the JCPOA have resulted in deadlock.
“China's role in facilitating the move raises a number of questions about the future of US engagement in the region, about the future of dialogue over the JCPOA and about increased Chinese engagement in the Gulf,” Mr Mabon told The National.
“Washington will be increasingly concerned about this development amidst a fractious relationship between US President Joe Biden and Saudi Crown Prince Mohammad bin Salman.”
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Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
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Most wins by an owner: Godolphin(9)
Most wins by a horse: Godolphin’s Thunder Snow(2)
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Age: 23
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Inspiration: My father. He’s a hard working man who has been through a lot to provide us with everything we need
Favourite book: Attitude, emotions and the psychology of cats by Dr Nicholes Dodman
Favourit film: 101 Dalmatians - it remind me of my childhood and began my love of dogs
Word of advice: By being patient, good things will come and by staying positive you’ll have the will to continue to love what you're doing
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The annual report by the Community Security Trust, which advises the Jewish community on security , warned on Thursday that anti-Semitic incidents in Britain had reached a record high.
It found there had been 2,255 anti-Semitic incidents reported in 2021, a rise of 34 per cent from the previous year.
The report detailed the convictions of a number of people for anti-Semitic crimes, including one man who was jailed for setting up a neo-Nazi group which had encouraged “the eradication of Jewish people” and another who had posted anti-Semitic homemade videos on social media.
If you go
The flights Etihad (www.etihad.com) and Spice Jet (www.spicejet.com) fly direct from Abu Dhabi and Dubai to Pune respectively from Dh1,000 return including taxes. Pune airport is 90 minutes away by road.
The hotels A stay at Atmantan Wellness Resort (www.atmantan.com) costs from Rs24,000 (Dh1,235) per night, including taxes, consultations, meals and a treatment package.
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1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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