The China-brokered Saudi-Iran deal has big repercussions for the Middle East — and the U.S.

DUBAI, United Arab Emirates — When arch-rivals Saudi Arabia and Iran announced they were restoring diplomatic relations, much of the world was stunned — not only because of the breakthrough after years of mutual animosity, suspected attacks and espionage between the two countries, but because of who brokered the deal: China.

Taking up a specific role that the U.S. could not have fulfilled, this was Beijing’s first foray into Middle East mediation, an area that for the past few decades was largely occupied by Washington.

As tensions simmer between the world’s two largest economies and U.S. policymakers sound the alarm over competition and security concerns with China, what does Beijing’s ascendance in the region mean for the Middle East — and for U.S. interests?

“Many are breathing a sigh of relief [with] today’s official Iran-Saudi agreement,” Bader al-Saif, an assistant professor of history at Kuwait University, wrote on Twitter after the news was announced. “All 3 parties to the deal can claim victory, but Saudis are arguably the biggest winner,” he contended.

From the Saudi perspective, normalization with Iran — a country that’s long been seen by the Saudi monarchy as one of its greatest security threats — removes obstacles in its reform and economic transformation journey, according to Joseph Westphal, a former U.S. ambassador to the kingdom.

“I think the leadership there believes that this is a very important moment for Saudi Arabia as it emerges … as a real leader in the world on many issues,” Westphal told CNBC’s Dan Murphy on Tuesday. “A constant struggle with Iran delays that and impedes the progress that they made.”

“Obviously, the United States could not have made this agreement possible because we don’t have a relationship with Iran,” the ambassador added. “I think China was a good partner to do this. I think they’re the right people,” he said, noting that China invests heavily in Saudi Arabia and is its top trading partner.

“So I think this is a very good thing all the way around.” 

Hopes for de-escalation in areas like Yemen, where Saudi Arabia has carried out a brutal war against Iran-backed Houthi rebels since 2015, are now more realistic than before, analysts say. Risks to shipping and oil supplies in the region may be reduced, and trade and investment between the countries could add to growth.

At the very least, improved communication will reduce risks of confrontation, said Torbjorn Soltvedt, principal Middle East and North Africa analyst at Verisk Maplecroft, who called the deal “a much needed pressure valve amid heightened regional tensions.”

Still, it’s a mistake to assume that everything is solved.

“Due to the ongoing shadow war between Iran and Israel – and sporadic Iran-backed attacks against shipping and energy infrastructure throughout the region – the risk of escalation due to miscalculation is still uncomfortably high,” he said.

In the past few years, the region has seen numerous attacks, particularly on Saudi and Emirati ships and energy infrastructure, which Riyadh and Washington blamed on Iran. Tehran rejects the accusations.

“Riyadh and Tehran will remain adversaries with competing visions for the region,” Soltvedt stressed. “But improved channels for communication have the potential to reduce the risk of a direct military confrontation between the two states.”

Iran is also now enriching uranium at its highest level ever, and is believed to be just months away from nuclear bomb-making capability. Rapprochement between Riyadh and Tehran may mean little if the latter’s nuclear program isn’t addressed.

The White House’s seeming reluctance to praise China was hard not to notice.

“We support any effort to de-escalate tensions in the region. We think it’s in our interests,” National Security Council spokesman John Kirby said of the news on Friday, adding that the Biden administration had made similar efforts in that direction.

But when asked about Beijing’s role, Kirby replied: “This is not about China and I’m not going to characterize here whatever China’s role is.”

The news signaled the growing influence of China in the Arab region. And not just economically, as it already exports an immense amount of goods to the Middle East and is the largest importer of Saudi oil – but politically. Leaders of Saudi Arabia and the UAE have made concerted efforts to diversify their foreign relations and move away from being overly dependent on the U.S., as successive American administrations treat the Middle East as less of a priority.

“I think it demonstrates that U.S.’s influence and credibility in that region has diminished and that there is a new sort of international regional alignment taking place, which has empowered and given both Russia and China newfound influence and status,” Aaron David Miller, a senior fellow at the Carnegie Endowment for International Peace and former Middle East policy advisor for the State Department, told NBC News.

He called the fact that China brokered the deal “stunning.”

Still, there seems to be a consensus that in terms of military power and security alliances in the region, U.S. influence is in no danger.

“No Chinese mediation — or any diplomatic involvement — will threaten US primacy in the region. All states, Iran included, know that,” Kuwait University’s Al-Saif said. The U.S.-Saudi Arabia security partnership spans nearly three-quarters of a century, and Saudi Arabia’s military arsenal is overwhelmingly supplied and maintained by the U.S. and American military personnel.

In any case, China’s gain doesn’t have to mean a loss for the U.S., many believe.

“This shouldn’t be a zero sum game for the US. It can serve US interests: Iran nuclear deal, Yemen, Lebanon for starters can benefit from the agreement,” Al-Saif said.

“A quick move should follow on these files [because] the agreement may not last long,” he added. “Might as well reap benefits while it lasts.”

It’s yet to be seen whether the agreement between the two Middle Eastern powers – and the mutual goodwill expressed in its wake – will last.

Many regional watchers are skeptical.

“Iran’s opting for engagement here should not be misinterpreted as a de-escalation,” Behnam ben Taleblu, senior fellow at the Foundation for Defense of Democracies, told CNBC. “Tehran is capitalizing on deeper Chinese enmeshment in Persian Gulf trade as well as increased Saudi hedging of the pro-American order in the region.”

“There was zero political cost to the Islamic Republic to this agreement, whereas the mere optics and politics of it, let alone the substance, are in Iran’s favor,” he said, stressing his doubt that Iran will stop meddling in regional conflicts and other countries via proxies and militant activity.

Ben Taleblu also argued that Iran’s enmity with Israel played a role in its calculations as “Tehran is trying to show that it beat Jerusalem to Riyadh, and is trying to push back and break out of the diplomatic isolation it felt due to the Abraham Accords” when the UAE and Bahrain normalized relations with Israel.

For al-Saif, there is “certainly hope for the agreement to live on” and lead to the prosperity that people of both countries deserve. “But,” he said, “neither KSA nor Iran will change overnight.”

Correction: This article has been updated to reflect that Bader al-Saif is an assistant professor of history at Kuwait University, not Khalifa University.