Iran has banned imports from Saudi Arabia and pilgrims from traveling to Mecca for the Umrah pilgrimage in a Cabinet meeting chaired by President Hassan Rouhani on Thursday.
The moves come after Riyadh announced it executed top Shia cleric Sheikh Nimr al-Nimr, an opponent of the ruling dynasty who demanded greater rights for the Shia minority, last Saturday.
The execution sparked a flurry of retaliatory developments. A group of protesters broke into the Saudi Embassy in Tehran and its consulate in Mashhad, which led to Riyadh halting diplomatic and trade ties as well as air traffic with Tehran, IRNA reported.
A group of Saudi allies, including Bahrain, followed suit and broke off diplomatic ties with Iran, while the UAE downgraded its relations and Kuwait and Qatar recalled their envoys.
On Thursday, Tehran said Saudi jets attacked its embassy in Yemen’s capital Sana’a.
Trade between Saudi Arabia and Iran is small compared with the size of their economies. According to data released by Iran Customs Administration, exports to and imports from Saudi Arabia stood at $159.07 million and $46.13 million respectively in the last Iranian year (ended March 20, 2015). This is while in the eight months ending November 21, 2015, Saudi Arabia exported goods worth $132.22 million and its imports reached $40.24 million.
Nevertheless, Riyadh will be missing out on revenues derived from the pilgrimage undertaken by hundreds of thousands of Iranians travelling to the kingdom every year to complete the haj as well as Umrah pilgrimages made outside of haj season.
Saudi Arabia makes around $18 billion a year from religious tourism and Iranians constitute one of the biggest contributors.
Moreover, Saudi companies doing business in Iran face increasing public pressure over the course of the week.
Saudi Arabia’s largest food products company Savola Group is paying the biggest price among Saudi stocks for the deepening diplomatic spat between the governments in Riyadh and Tehran, according to Bloomberg. Shares of the Jeddah-based food producer, which earns some 13% of total revenues from Iran, sank 9.8%, the most since March, to 43.70 riyals on Tuesday, the lowest level since April 2013, wiping 3.5 billion riyals ($933 million) off its market capitalization in three days.
The stock was the biggest contributor to losses on the Tadawul All Share Index, which dropped 0.7%. Savola said on Tuesday it plans to maintain its investments there despite the standoff.
But some other Saudi companies doing business in Iran also face increasing public pressure over the course of the week, as consumer and business groups call for the boycott of Iranian products.
Out of all the Arab allies of Riyadh, only the UAE has remarkable trade ties with Iran. In fact, the country is one of Iran’s biggest trade partners, having acted as a center for reexporting goods to Iran, which indicates the neighboring country’s interest in not cutting all its ties with Iran.
Figures show that Emirati exports to Iran stood at $12.24 billion and its imports from Iran reached $4.06 billion last year. The eight-month data reveal exports of $3.4 billion and imports of $6.78 billion to and from the Arab neighbor.
