Divesting From Sectarianism: Reimagining Relations Between Iran And The Arab Gulf States

Until recently, Iran has been economically isolated by way of sanctions, preempting investment opportunities with states allied with the United States. However, the Obama administration’s recent effort towards economic normalization with Iran affords it with unprecedented commercial possibilities, and per the focus of this article, legalized commercial enterprising within Saudi Arabia, the United Arab Emirates, and other Gulf Cooperation Council (GCC) States—across sectarian tensions and fault lines. From both a legal and practical prism, this article investigates the recent lifting of sanctions, which opens the door for Iran’s investment within neighboring states including the GCC. Subsequently, it analyzes how commercial investment and the reciprocal advancement of economic interests offers a promising pathway toward eroding political standoffs, economic inequities, and the politicization of sectarianism. In closing, the article addresses salient challenges that may hinder the potential of this economic rapprochement, and ways forward. 

Hamada D. Zahawi
Khaled A. Beydoun
May 18, 2016

I. Introduction

Sectarian tension is polarizing the Middle East like never before. Proxy wars pitting Iran, the Shiite hegemon, against the Sunni guard—Saudi Arabia and the Gulf states—are intensifying throughout the region. Both Iran and the Gulf States have exploited sectarianism to broaden their political spheres of influence in the region, and as a means of advancing their economic agendas. In short, sectarianism is realpolitik strategy and business strategy for states in the region.

Until recently, Iran has been economically isolated by way of sanctions, preempting investment opportunities with states allied with the United States. However, the Obama administration’s recent effort towards economic normalization with Iran affords it with unprecedented commercial possibilities and, per the focus of this article, legalized commercial enterprising within Saudi Arabia, the United Arab Emirates, and other Gulf Cooperation Council (GCC) States, across sectarian tensions and fault lines.

The prospects for ameliorating sectarian tension and embedded political rivalry through commerce are undoubtedly considerable. As examined by political scientists and renowned economists, symbiotic advancement of economic interests is an effective means of forging better diplomatic relations and sustained alignment. Therefore, commercial investment stands as the optimal conduit toward divestment from sectarian tensions, and mitigating the direct, proxy, and collateral standoffs rooted in it.

From both a legal and practical prism, this article investigates the recent lifting of significant sanctions between the international community and Iran, which opens the door for the latter’s investment within neighboring states, including the GCC. Subsequently, it analyzes how commercial investment and the reciprocal advancement of economic interests offers a promising pathway toward eroding political standoffs, economic inequities, and the politicization of sectarianism. Thus, envisioning coordinating economic understanding and advancing the interests of states currently interlocked in sectarian strife as an alternative to the politics of sectarianism is the central focus of this article. In closing, the authors address salient challenges that may hinder the potential of this economic rapprochement, and ways forward.

II. The Modern Evolution of Political Sectarianism in the Middle East

Sectarianism is politically and discursively framed as an age-old, deep-seated rivalry between Sunni and Shiite Muslims. While the theological divisions are old, they have not manifested themselves in stark political terms until recently. The politicization of sect, spearheaded by the GCC states (most notably Saudi Arabia) and Iran after the 1979 revolution, have mutated the salience of sect from a largely private spiritual matter into a political vehicle to realize state interests.1

In the modern Middle East, Iran and the GCC exploit and mobilize sectarianism to promote their interests. Iran’s spheres of regional influence are strongest in states with indigenous Shiite populations. These states include Lebanon, where Shiite Muslims comprise roughly 27 percent of the small Mediterranean nation’s population and are historically marred by economic and political marginalization.2 Neighboring Syria, currently bludgeoned by a civil war fought squarely along sectarian lines, is also home to a sizable Shiite population. Approximately 13 percent of Syria’s population, before the war, was Shiite, comprised largely of Alawi, Twelver, and Ismaili Shiites.  The war-torn nation is overwhelmingly Sunni, with 74 percent of its Muslim population following one of the Sunni schools. Capitalizing off of the presence of these Shiite populations in the Levant, Iran has established a strong political relationship with the presiding Bashar al-Assad government in Syria, and in nearby Lebanon, proxy affiliation with the Shiite militia organization Hezbollah.3

The recent civil strife in Yemen, the Arab world’s poorest nation, is viewed by many as just another proxy war between Iran and Saudi Arabia, whereby the former stood with the Houthi Shiite faction. As the journalist Jared Maslin wrote in 2016, “Arrayed against the Saudis are the Houthi rebels and their allies within Yemen. The Houthis are a movement committed to Zaidism, which is an offshoot of Shiite Islam and aligned with Iran. Some Saleh loyalists have also entered an alliance of convenience with the Houthis.”4

With Yemen directly to its south, Saudi Arabia viewed Iranian support of the Houthi militias as a sectarian play and responded in kind, aligning with the Sunni-majority opposition. This illustrates yet another dimension of how sectarianism in the region provides a popularly resonant tactic, and potent state strategy, for carrying the rational interests of nation-states forward. The small Gulf country of Bahrain, also home to a sizable population of Shiites, was also the site of an explosive “Arab Spring” revolution in 2011, contested by the largely Sunni government as Iran mobilized the nation’s majority population (roughly 65 percent) to protest and topple the government.5 The “Shiite Uprising” in Bahrain, as some have dubbed it, was suppressed by the Saudi-backed regime, and five years after, offers another lurid illustration of how sectarianism is deployed and amplified by Iran and Saudi Arabia to secure and advance inerests.

The vast majority of the Middle East’s population practices Sunni Islam. Mirroring the global Muslim population, approximately 87 to 90 percent of Muslims in the Middle East practice one of the Sunni schools of Islamic thought.6 The GCC, and particularly Saudi Arabia, export Sunnism as a vehicle for advancing their aims.  This provides a sharp demographic advantage to the GCC states, and Saudi Arabia specifically, to export and expand its specific brand of Sunni Islam, Wahhabism, into predominantly Sunni populations in Syria, Lebanon, Yemen, Iraq, and states in north and sub-Saharan Africa.

As deployed by Iran, sect becomes more political tool than religious sentiment.  Indeed, the very basis for winning the hearts and minds of populations that share kindred takes on Islam, and subsequently, using that foundation to expand a nation-state’s sphere of influence, carries forward specific political objectives that facilitate the economic ambitions of the state. Iran’s saber-rattling with Israel, a close ally of the United States, and its affiliation with Hezbollah, a proximate rival of Israel’s, rendered it a political pariah for the United States, which led to the placement of economic sanctions until very recently. A change in the state of these sanctions, while politically

controversial in the United States, opens the door for relieving the sectarian jostling, posturing, and proxy wars unfolding in the Arab World.

III. Normalization of Relations

Even before the removal of select sanctions on Iran, relations with the West have been cooling since Hassan Rouhani was elected in 2013. Rouhani replaced the fierce-talking firebrand Mohamoud Ahmadinejad, a succession welcomed by the United States and its GCC allies. Furthermore, this cooling was underscored by key liberalizing economic policies to attract investors and a general rapprochement with western powers to ease the crippling sanctions on the country.

While Rouhani has made outreach to the Gulf states a priority, ongoing conflicts in Yemen, Syria, and Iraq, where Iran is playing a central role, have rendered his efforts moot, as they have largely “landed off the mark.”7 That said, his government’s new direction has helped to considerably improve Iran’s position in the world. This culminated in a comprehensive nuclear deal, signed in July 2015 and implemented in January 2016. The multiparty initiative has gone a long way towards forging the environment necessary for a normalization of relations with many countries, paving the way for opening its economy for trade and investment.

On 16 January 2016, the world awoke to the following headlines: “Sanctions lifted after Iran found in compliance on nuclear deal.”8 This was hailed as a masterstroke by world leaders, with U.S. secretary of state John Kerry, one of the key architects of the deal, calling the world “a safer place because of the developments.”9 While condemned by Republican leadership, the lifting of sanctions not only brought about immediate changes in economic policy, but also foreshadowed the prospect of markedly improving economic and political ties with Iran, a nation long branded as a pariah, at best; and at worse, a terrorist state and core part of the “axis of evil.”

The sanctions, however, were only lifted in part. When the International Atomic Energy Agency certified that Iran had met its obligations, the U.S. eased sanctions that were limited and focused primarily on the recently implemented nuclear-related sanctions, often referred to as “secondary sanctions.”10 However, the primary sanctions that have been in place for over twenty years still remain, inhibiting trade and direct investment by U.S. companies in Iran.11 Primary U.S. sanctions, as outlined by the Joint Comprehensive Plan of Action (JCPOA) reached by China, France, Germany, Russia, the United Kingdom, the United States, the European Union, and Iran, are those that apply directly to (1) the activities of U.S. persons (and in the case of the Iran sanctions, non- U.S. entities that are “owned or controlled” by a U.S. person), (2) non-U.S. persons who cause U.S. persons to violate the sanctions maintained by OFAC, and (3) transfers of U.S.-regulated goods and technology to Iran.12 President Obama has opted to issue “waiver orders” for the sanctions still in place, particularly relating to banking transactions, to try to circumvent unnecessary restrictions put in place by a Republican-dominated congress. 13, 14

The secondary sanctions were initially implemented to deter non-U.S. persons from engaging in certain key sectors in Iran including energy, financial services, mining, and shipping.15 With the lifting of the secondary sanctions, this now allows non-U.S. companies and persons to engage in transactions with Iran in these sectors, unless the non-U.S. companies or persons are subsidiaries of U.S. companies, which would subject them to primary sanctions. In essence, Secretary Kerry acknowledged that, as a result of the U.S. embargo on Iran, U.S. companies “will not be part of that rush [to do business in Iran] unless specifically exempted, and very few are.”16

In function, U.S. sanctions are far more stringent than EU sanctions. They have an extraterritorial effect (worldwide application), while the EU applies only to Europe. As a result, U.S.–Iran trade is not expected to increase significantly under the current sanctions regime, but that could change in time, with current exports to Iran totaling over $250 million.17 Predictions outline that the majority of U.S. exports to Iran will be limited to medicines, medical supplies, and agricultural products.18

Outside of the United States, countries of the European Union terminated all nuclear-related economic sanctions (secondary sanctions), including an embargo on buying Iranian crude oil. The EU terminated the majority of its sanctions, including restrictions on financial transfers to and from Iran and “most restrictive measures targeting the Iranian banking, insurance, oil and gas, petrochemical, shipping, shipbuilding and transportation sectors.”19 Germany, for example, exported $2.4 billion to Iran in 2014 while importing up to $330 million,and China has imported over $20 billion, mainly in terms of oil sales from Iran.20, 21 With the opening of correspondent banks to make payment transactions, trade is expected to grow globally despite the presence of primary sanctions in place. Moreover, sanctions have added 15 percent to the cost of trading with Iran, and therefore removal of the sanctions is estimated to “save the country [Iran] some $15 billion yearly in cheaper trade,” according to Iran’s first vice-president Eshaq Jahangiri.22 Such changes will have considerable benefits for exporters to Iran and importers of Iranian goods, not only internationally among European and Asia partners, but most certainly for trade relations between the Middle East and Iran.

IV. Mitigating Role of Commerce

The Middle East is frequently caricatured as the hotbed for petroleum, a stereotype that, indeed, is based partly on fact, but dismissive of the fact that many states in the region lack this invaluable resource and, outside of the GCC, are generally in precarious or modest economic straits. Iran, a non-Arab giant east of the GCC, possesses one of the more multi-dimensional and stable economies in the region. While rich in oil reserves, the nation has developed industry, agriculture, and spheres of development that make it one of the more advanced economies in the region. For GCC states, which have comparatively one-dimensional economies, bolstering economic relations with Iran could be of great benefit.

Iran: An “Untapped Market”

Despite having the fourth largest oil reserves in the world and second largest stocks of natural gas, Iran is by no means a typical Middle Eastern “petrodollar” economy. According to financial analysts, “Iran is perhaps the region’s most diverse economy with an established capital market, a well-developed industrial base and a large population that generates a significant demand for services such as telecommunications and banking.”23 In fact, Iran has the 27th largest economy in the world in terms of GDP ($406 billion in 2014) with predicted economic growth rates as high as 5-6 percent in 2016, in light of the partial removal of sanctions.24

Foreign direct investment (FDI) into Iran, primarily channeled into the oil sector, was at $4 billion in 2010, and declined significantly by 2014. That said, estimates by the World Bank in 2015 predict FDI to rise back to more than $3 billion by 2017. Iran has already indicated that the oil sector needs $130–145 billion in new investments by 2020, and its automobile, pharmaceutical, and aviation sectors similarly need major upgrades. On a recent road show in Europe, Iran made it known that it was soliciting $50 billion in FDI to finance the economy.25 Potential deals with Italy (steel), France (planes), and Germany (automobiles) were just the start of realizing Iran’s ever-promising potential; Iranian pundits have optimistically stated that the country “could be the best emerging market for years to come.”26, 27

Given these developments, combined with a highly educated population and established infrastructure, Iran is a boon for any opportunistic, risk-seeking investor. This is especially the case in the technology and innovation sector. According to those working in this space in Iran, the country is ripe for investors from the region and internationally. 28 The sanctions have created a void for new technology and entrepreneurship, allowing for minimal competition and plenty of greenfield investment opportunities, especially in e-commerce and financial technology. Moreover, internet penetration is the highest in the region. This makes Iran the ideal setting to launch a startup and leverage the untapped market of 80 million people.29 Sir Martin Sorrell, chief executive of advertising giant WPP, declared Iran “one of the last major untapped frontiers for business.”30 Such an environment makes Iran the ideal setting to divest from sectarianism by the sheer economic and investment opportunities in the country.

With that said, the economic and potential benefits of the JCPOA for GCC-Iran relations will ultimately be dictated by perceptions and actions, and their attendant implications on the mindsets of the Sunni dominated ruling elites. As a result, as Hussein Ibish of the Arab Gulf States Institute pointed out, “If the Gulf states believe that Iran is continuing to pursue an aggressive posture in the Middle East or, worse, is intensifying its destabilizing activities [in Syria, Yemen, and Iraq], the nuclear agreement will have failed in the eyes of Iran’s neighbors.”31 Indeed, the GCC states will see increased trade and investment as a mere Band-Aid, with an overriding perception that their security is still under threat, “if not by nuclear weapons, then by Iran’s ongoing quest to expand its regional sphere of influence.”32

UAE–Iran Relations: A Paradigm for for Future Economic Cooperation

In 2014, the ruler of Dubai, Sheikh Mohammed bin Rashid al-Maktoum, argued that the stringent sanctions on Iran should be revoked. He noted that, “Iran is our neighbour… If they agree to peace with the Americans and the Americans lift sanctions, then everyone will benefit.”33 This rhetoric, from the head of a GCC nation with considerable influence, was unprecedented; and for optimistic onlookers and stakeholders, perhaps a sign of progressive reform and retrenching sectarianism.

In the past ten years, the UAE has emerged as one of Iran’s largest trading partners, especially with the emirate of Dubai. This can be explained by the long history of trade and travel between Iran and the northern emirates of Sharjeh, Raas-al-Kheimah, and Dubai, prior to the creation of the UAE.34 As of 2010, the emirate of Dubai is said to be home to an estimated 400,000 residents of Iranian descent.35 This phenomenon has come through waves of immigration, the most recent of which consisted of merchants and professionals, trading the restrictions of Iran for the seemingly endless financial opportunities of Dubai. In time, these business elites have played a critical role in facilitating bilateral trade and investment between the UAE and Iran.36 These residents of Iranian decent may continue to play a major role in the coming years to ensure that trade and investment between both nations will continue to flourish.

Indeed, the UAE has enjoyed a significant trade surplus with Iran. Iran’s imports from the UAE rose 11 times from 2000-2008.37 And due to re-exporting made possible by the Jebal Ali Free Zone container port and other ports in Dubai, exports into Iran have risen steadily. Access to the UAE, again mostly in Dubai, has allowed Iranians to establish as many as 9,500 branches in the UAE in 2008, and upward of $300 billion in investments.38 Yet, this trend began to slow considerably with the tightening of sanctions in 2012 and demand by the U.S. to crack down on “sanctions-busting.”

According to a recent study carried out by the World Bank, the UAE in 2014 commanded 39 percent of exports to Iran, yet took in very little in Iranian imports, at a paltry 2 percent.39 A combination of restrictions on banking transactions, customs regulations, and general pressure from the U.S.—a trading partner that the UAE holds far more dear than Iran—has forced a curbing of trade and investment between both nations.40 That said, with the removal of sanctions, the trade game can change significantly. The 2015 World Bank report predicted that “[e]xpansion in exports and imports could also affect Iran’s bilateral trading partners’ economies, particularly UAE, positively and could boost their growth.”41

In summary, if Iran achieves greater integration, the most immediate beneficiary in the region will ultimately be Dubai. The Emirate is best positioned to grow its Iran trade and services network through its logistics facilities for air traffic (Dubai International Airport) and container port (Jebel Ali Free Zone), allowing Dubai to be well-placed to serve the Iranian market, and play a leading role stewarding GCC states to follow suit.42

Bahrain: Leveraging Private Sector Development to Mitigate Internal Sectarianism

While much attention is paid to state-to-state sectarian divisions and rivalry, one should also take a brief look at divisions that exist within countries, particularly within the GCC, and how commerce can play a role in mitigating potential internal divisions with an eye toward domestic mending having positive, goodwill benefits with countries such as Iran. As exhibited by longstanding sectarian divisions in Lebanon, the bloody strife still unfolding in Syria, and per the focus of this section, the failed Shiite-led revolution in Bahrain, economic development can also function to alleviate internal sectarian tensions; which, collaterally, will effectuate external mitigation of sectarian divisions.

In the GCC, Bahrain has the largest number of Shiite citizens (about 65 percent), with the remaining states possessing smaller but nonetheless sizeable Shiite populations.43 The ruling monarchy in Bahrain is Sunni and has been since the country’s inception. Yet being Shiite is not synonymous with poverty. As a Bahraini commentator noted, “Bahrain is home to economically powerful Shiite families and high-ranking Shiite government officials.”44 That said, tensions between the sects reached a boiling point during the Arab Spring of 2011.45 One of the principal points of contention for the Shiite demonstrators was the desire to get “more jobs and a stronger role in the economy,” as they are “subject to significant economic discrimination.”46, 47

Outside the political realm, efforts since 2011 are being made in terms of private sector growth and commercial empowerment to help support Bahrain’s entrepreneurs, many of whom are Shiite, and fledgling small to medium enterprises (SMEs). While not an overt policy to directly target Shiite communities, the efforts of on-the-ground organizations such as Tamkeen, tasked with developing Bahrain’s private sector “as a key driver of economic development,” has been generally successful in achieving this critical outreach.48

One of Tamkeen’s many initiatives is the Community Engagement Initiative, which was launched in November 2012 and consists of visits by Tamkeen representatives to different societies, clubs, and social gatherings throughout Bahrain to bolster key competencies and raise awareness as to how Bahrainis can contribute to economic development.49 As a result of their concerted efforts to reach the whole island, underserved communities have benefited from engagement and efforts to improve their role in the private sector, including those disenfranchised Shiite communities. To date, “more than 75,000 Bahraini individuals and enterprises in Bahrain have benefited from Tamkeen programmes, and the total number is expected to rise to more than 100,000.”50 Supporting organizations similar to Tamkeen throughout the GCC region is critical to leveraging commerce and business to help mitigate sectarian divisions that in turn can have positive impacts on macro-level regional stability, including closer economic ties with Iran.

V. Potential Challenges and Ways Forward

With sectarianism still rampant between Iran and the GCC states, most vividly illustrated in the strife in Syria and Yemen, economic developments showcased in the previous section provide reason for optimism. Below, we provide some immediate challenges standing in the way of economic harmonization between Iran and GCC states, and subsequently, pragmatic ways to work past them.

Realities of GCC Security Cooperation

The GCC was created in 1981 in part as a collective defense organization against Iran. Yet it lacks a mandated foreign policy agreement for collective defense capabilities, in contrast with NATO’s Article 5 commitment of a mutual defense agreement.51  Nevertheless there is a tacit obligation among the members to work together in the area of regional security. Deviations regarding major regional security issues are generally frowned upon. For years, Iran was viewed as a nemesis and its nuclear program was proof to the GCC states that nuclear proliferation was forthcoming and endangering their way of life. This has caused a sense of visceral antagonism with Iran, especially magnified under the presidency of Mahmoud Ahmadinejad, who presided over the country from 2005 to 2013.

Political commentators have also pointed to the collective military action of the GCC states in Yemen, led by Saudi Arabia, as a sign of tensions with Iran given the perceived threat of the Shiite, Iran-backed Houthis.52 Most recently, Saudi Arabia executed the outspoken Shia cleric Sheikh Nimr al-Nimr, causing an immediate backlash from Iran and resounding condemnation of this act. After Iranian protestors fire-bombed the Saudi Arabian embassy in Tehran, the Saudi government severed ties with Tehran. Predictably, members of the GCC followed suit, including the UAE and Bahrain, and the general membership issued a formal statement urging Iran to “stop activities that cause instability in the region.”53 This is a case in point: When Saudi Arabia, the de facto head of the GCC due to its sheer population size, oil wealth, and military prowess, undertakes a major political action, many if not most of the member states will toe the line and follow suit.

Moreover, with the JCPOA, optimism is taking hold in the GCC. Each member state has expressed support in the media for the removal of sanctions. The GCC during the August 2015 summit publicly backed the nuclear deal while individual members such as Qatar noted that it was a “significant step” toward enhancing regional peace and stability.54, 55 Oman, who had played a seminal role in initiating negotiations as early as 2009, was lauded by counterparts in its efforts to bring the parties to the table culminating in the JCPOA.56

Riding this wave of support and enthusiasm, the UAE, as well as other predominately Sunni GCC states, such as Oman and Qatar, can truly benefit by capitalizing on its trade surplus with Iran and leveraging the business elites of Iranian decent to help spur investment and economic ties, thereby shunning the divisive nature of sectarian divisions and political saber-rattling. While this may be a positive sign, in terms of the financial system, banks are generally more cautious given the sanctions that still remain on Iran. For example, the sanctions prohibit Iran-related trades in U.S. dollars from being processed through the U.S. financial system. Such a limitation is a “significant complication given the dollar’s role as the world’s main business currency.”57 Nevertheless, regional banks are taking the lead in exploring opportunities to work within the existing system and yet plan to enter the country in “several stages” when there is more clarity as to policies, procedures, systems, and controls.58

It is worth noting that there is another factor that is forcing the GCC members to collectively rethink their position with regard to Iran: ISIL (the Islamic State of Iraq and the Levant). Iran has made it known through rhetoric and action that ISIL is “neither Islamic nor a state,” demonstrating its vehement ideological opposition to this terror entity.59 However, Saudi Arabia has made it known that Iran is fomenting the rise of ISIL and similar organizations, and cannot be depended on to limit such a terror group’s reach, especially in their backyard.60

Given the proxy wars that are taking place in Yemen, Syria, and Iraq, it is difficult to ascertain how the GCC will ultimately work with Iran in stemming the rise and advance of ISIL and other destabilizing forces. Iran has indicated that it would welcome the “establishment of a collective forum for dialogue in the Persian Gulf region, to facilitate engagement.”61 Yet, it would be incumbent on Iran to take this a step further to form a bloc with its neighbors and western nations to signal its desire to end the spread of ISIL. A free trade agreement between the GCC and Iran was, for example, broached in 2008, but faded with continuing tensions.62 Revisiting such an agreement would go a long way in helping ensure regional stability and would underscore the theory that economics can indeed override political, social tensions. But as the scholar Afshon Ostovar writes of future regional stability in light of the nuclear deal, “It requires compromise between Iran and its Arab neighbors and a decoupling of sectarian chauvinisms from the decision-making process. In the absence of fundamental change, the future outlook for Iran and the region is discouraging—deal
or no deal.”63

A Renewed Twin Pillar Strategy

During the 1970s, then-president Richard Nixon formulated the “two pillars policy.” According to this plan, the “two regional powers of Iran and Saudi Arabia act as two regional pillars of resistance and maintenance of the Persian Gulf’s and the Middle East’s trench for the Western camp.”64 This policy had both countries act as gendarmes of the region to safeguard regional security, while being co-dependent on the U.S. for arms and strategic cooperation, and thereby avoiding co-option by the USSR. Today, the Cold War is far over, and things have changed significantly between Iran and Saudi Arabia. While the underlying reason for the rift between both nations is much contested, Majid Behestani and Mehdi Shahidani write that it is “power politics, not sectarianism, [which] ultimately governs the relationship … [with] greater agency than many analysts concede.”65

As such, it is not inconceivable that Saudi Arabia and Iran can usher in a renewed twin pillar policy, which can see them once again cooperating on a regional level, shunning their outward sectarian differences, and instead rallying around what Iranian Foreign Minister Mohammed Javad Zarif laid out, as “security building measures; combating terrorism, extremism and sectarianism; ensuring freedom of navigation and the free flow of oil and other resources; and protection of the environment.”66 Of course, the current proxy conflicts Lebanon is causing adds tensions that some predict may blow over. That said, both countries are slowly recognizing that they each stand to benefit more from a broader rapprochement than a constant war of attrition. This is especially true as Iran is once again being welcomed into the international community. Saudi Arabia will have little choice but to face more difficulty convincing its neighbors and citizens that Iran is the perennial bogeyman for regional crises.67

The United States and Europe should support such a return to the cooling of relations with the goal of using these two powerful nations as the pillars for peace and regional stability.68 One can argue that in light of Saudi Arabia’s leading role in the GCC, countries such as Bahrain and Kuwait will follow suit in terms of foreign policy, and the remaining GCC states of Qatar, Oman, and the UAE, who are already Iran-leaning in terms of economic relations, will similarly fall in line to support such a cooperative union.

Authors Frederic Wehrey and Richard Sokolsky have suggested creating a security forum for the GCC, which would be supported by the U.S. and include Iran and Iraq to help “reduce tensions, manage crises, and prevent disputes that could escalate into armed conflict.” 69 This forum would also include a component that would promote the free flow of ideas and strategies by including “a basket on economic development… that Iran is already amenable to join.”70 Such a change in outlook will invariably help spur trade, investment, and sustainable business relations between the GCC and Iran.

Cultural Diplomacy: The Role of Educational Exchange

Cultural diplomacy is regarded as “forming international bridges and interactions, identifying networks and power domains within cultures and transcending national and cultural boundaries.”71 Author Richard Ardnt observed that “cultural diplomacy is a cost effective practice considering its outcomes and impacts on international ties between countries.”72 At the very heart of cultural diplomacy lies education, and educational exchanges within and between countries. Education is widely recognized as the key driver in fostering knowledge, job-creation, and economic growth between countries. Indeed, in countries such as Canada, “international education is at the very heart of our current and future prosperity,” a sentiment that can be applied globally, including in the Middle East.73

The Institute for Cultural Diplomacy outlines a number of initiatives where such exchange has been key to helping create closer ties between disparate communities and formerly antagonistic countries.74 The Fulbright Program is a quintessential example of such exchange, with more than 360,000 Fulbrighters hailing from 160 countries since its inception in 1946. The founder of the program, J. William Fulbright, summarizes its impact by declaring that “Educational exchange can turn nations into people, contributing as no other form of communication can to the humanizing of international relations.”75

Between 1974 and 1983, Iran was the top sender of international students to the United States, reaching a peak of 50,000 students in 1979.76 With the cooling of relations this number has significantly decreased to just over 11,000 in 2015.77 That said, the U.S. Treasury has authorized academic exchanges with Iran, an encouraging sign allowing academic institutions to establish academic agreements with Iranian universities to learn and trade knowledge, as well as technical know-how.78

Iran is also capitalizing on this form of cultural diplomacy by sending students across the world, including the Middle East. For example, in 2012 there were more than 3,000 Iranian students studying in the UAE.79 Such educational exchange forges trust, creates business ties, and provides a calming effect on existing tensions between national groups. Seeing the impact of cultural diplomacy through education, encouraging further study abroad opportunities for Iranians and for students to visit Iran is truly key for the forging closer ties and reducing sectarian and nationalistic tensions. Through such exchange, current students are exposed to job placements, joint entrepreneurial ventures, and business opportunities, as students and as budding professionals.

Innovation & Entrepreneurship: iBridges

Sports, it is said, are an effective galvanizer of people across political, socio-economic, religious, and sectarian lines. This was truly the case in 1998, when Iran played the U.S. in the soccer World Cup. Throngs of people united to watch their countries play, and in a show of solidarity, white flowers, a symbol of peace, were exchanged between the players before kick-off.80 While it ultimately was an ephemeral act of unity, it demonstrated the ability to overcome cleavages outside of politics. In the same vein, commerce, especially in terms of innovation, scientific development, and entrepreneurship, can play a similar role in bridging divides.

In 2014, iBridges was formed as an “inclusive and collaborative community, free from any political or ideological affiliations, that works towards bringing to life a diversity of impactful initiatives, platforms and spaces that all tangibly serve to contribute to the development of the high-tech entrepreneurial sector in Iran.”81 This has become an excellent apolitical platform for free exchange of ideas, business cards, and investment opportunities across the world. The University of California-Berkeley hosted the inaugural convention in 2014 with more than 700 in attendance. The success of the event spawned a second convention in 2015 in Berlin. The event was of particular importance since it was not only attended by Iranians and western Europeans, but a multitude of Middle Eastern incubators, investors, startups, and accelerators; those entities that form the bedrock of the innovation ecosystem in the MENA region.

TechWadi, with its motto “Building Bridges for Entrepreneurship,” ensured the success of the event by bringing “in leaders from its own growing ecosystem to share knowledge and opportunities with the budding Iranian tech network.”82 Indeed, entrepreneurs such as Hala Fadel from the recently formed Lebanese startup Leap Ventures was eager to identify and invest in high-growth Iranian startups.83 Such an exchange of grassroots opportunities is exactly how commerce can create
commonality between rivaling factions, antagonistic ethnic divisions, and divisive
sectarian beliefs.

Supporting organizations such as iBridges is a sign of the times, as there is truly unbounded greenfield potential in the tech and startup space in Iran. With the right regulatory environment and support by local and international universities, institutions, and the international entrepreneurship community from Silicon Valley to TechWadi, this can be an incredibly thriving mechanism to divest from the tensions that exist and instead bring everyone to the table with the goal of meeting the needs of populations with technology and bonafide innovation. Grassroots commerce from the tech space has a way of skirting political affiliation and simply focusing on the task at hand: creating solutions to social problems in a collaborative manner. To this end, iBridges and other grassroots forums should be supported as a principal mechanism to divest from sectarianism.

VI. Conclusion

While conservative elements in the West, as evidenced by the 2016 presidential election, are giving new legs to Samuel P. Huntington’s “Clash of Civilizations” paradigm, which pits the West versus Islam, the Middle East is actively mired in a clash of sectarianism.84 This latter clash is fought on many fronts, most visibly the proxy wars unfolding in Syria and Yemen, and the cold wars within diplomatic, political, and economic battlegrounds.

The United States’ lifting of sanctions in Iran offers optimism for retrenching the rife and politicized sectarianism pitting Iran against the GCC, a transnational body closely aligned with the United States and led by Saudi Arabia. Ameliorating sectarian tension and embedded political rivalry through commerce shows considerable promise, and the lifting of sanctions can be a key catalyst in spurring the initial steps toward greater cooperation between Iran and the GCC  Indeed, symbiotic advancement of economic interests is an effective means of forging better diplomatic relations and sustained alignment, and commercial investment stands as the optimal conduit toward divestment from sectarian tensions and mitigating the direct, proxy, and collateral standoffs rooted in it.

Without question, the obstacles are imposing and hurdles plenty. Sectarianism in the region, particularly with the rise of ISIL and the bloody standoff in Syria, seems to be amplifying. Yet, the lifting of sanctions on Iran may force the Shiite stalwart to reconsider its strategy, and reevaluate how commercial investment and the reciprocal advancement of economic interests offers a promising pathway toward eroding political standoffs, economic inequities, and the politicization of sectarianism. Iran, like Saudi Arabia and its GCC allies, may very well discover that politicizing economics, instead of sect, may offer a better pathway for advancing their national interests.

Hamada Dara Zahawi is an international attorney-advisor with the Commercial Law Development Program (CLDP) in the Office of the General Counsel of the U.S. Department of Commerce. Mr. Zahawi works primarily on commercial legal reform and economic development in Iraq, Afghanistan, and countries in the Arabian Peninsula, including Bahrain, Saudi Arabia, Kuwait, Qatar, Yemen, and the United Arab Emirates. Prior to joining CLDP, Mr. Zahawi was in private practice with a focus on project finance, international commercial law, and Islamic/Middle East finance. Mr. Zahawi earned his JD at the University of California-Berkeley Law, where he co-founded the Berkeley Journal of Middle Eastern and Islamic Law and served on the editorial board of the California Law Review. Mr. Zahawi also holds a master’s (M.Phil) in international relations from the University of Cambridge, where his studies focused on modern Middle East economic, legal, and social affairs. He earned his bachelor’s degree from the University of California-Los Angeles. Mr. Zahawi is fluent in Arabic and conversational in Spanish.

Khaled A. Beydoun is an Assistant Professor of Law at the University of Detroit Mercy School of Law. He is also an affiliated faculty member at the University of California-Berkeley Islamophobia Research and Documentation Project. A constitutional law, national security, and critical race theory scholar, Professor Beydoun’s work has been featured in top law journals, including the California Law Review, the UCLA Law Review, the American University Law Review, and more. In addition, Professor Beydoun’s commentary on pressing legal and political matters has been featured on BBC News, Al Jazeera English, Newsweek, and Salon.com. A Detroit native, Professor Beydoun is a graduate of the University of Michigan, the University of Toronto, and the UCLA School of Law.