Economy, Business And Markets

Iran and Oman: Burgeoning Allies

Iran and Oman: Burgeoning Allies
Iran and Oman: Burgeoning Allies

In recent months, Oman announced the launch of a direct shipping route between its port of Sohar, 220 km north of Muscat, and the Iranian port of Shahid Rajaie near Bandar Abbas on the shores of the Strait of Hormuz.

It has also announced the pilot voyage of a new ferry service between Muscat’s Sultan Qaboos Port and Iran’s Chabahar Port. These announcements show how bilateral ties between Oman and Iran are deepening, reads an article in American bimonthly magazine World Affairs.

Oman has long prided itself on what its leaders believe to be a more independent and balanced foreign policy that has, at times, diverged from its partners in the [Persian] Gulf Cooperation Council. However, that independent streak also has some history.

When Oman’s Sultan Qaboos came to power in 1970, Iran deployed 4,000 troops to help quell Oman’s internal rebellion and insurgency in Dhofar Province. That assistance provided in a time of need has never been lost on Sultan Qaboos and helps to explain why the two countries have remained important allies despite the strong western sanctions placed upon Iran over its nuclear program.

Indeed, it was Sultan Qaboos who played the instrumental role as sponsor of the secret negotiations between the United States and Iran that ultimately ended the sanctions.

As noted by Iran’s ambassador to Oman, Ali Akbah Sibaveh, “Iran will repay the sultanate for remaining an ally through ‘thick and thin’ by increasing investment into the country.”

That history has positioned the sultan to make deals with Iran that Oman hopes will help him offset the effects of the 70% decline in crude oil prices of the recent two years. This shifting alignment, however, will almost certainly place greater strain on the politics of the [P]GCC and produce further ire from Saudi Arabia, which is struggling to prove its regional clout.

 commercial ties

Iran’s quest to find new investors and trading partners to solidify its access and expand commercial ties to the landlocked countries of Central Asia is the stage where the realignment drama will likely in part unfold. During a visit to Asghabat, Turkmenistan, in March 2015, Iranian President Hassan Rouhani promoted Iran’s burgeoning relationship with Oman by stating his desire “to activate a ‘south-to-north economic corridor’ that starts with Oman”.

In addition to greater linkages with Central Asia, Oman hopes that the trade corridor will become an essential transshipment point for the sale of Iranian goods. While that would bolster Oman’s trade portfolio, it will also place it in direct competition with another [P]GCC member and traditional ally, the UAE and also Iran’s second largest trading partner. Rouhani’s visit to Turkmenistan was followed up in January 2016 with the passage of four bills in parliament approving the further development of the trade route.

In this age of low oil prices and economic uncertainty, Oman appears more willing to overtly embrace Iran’s rising economic presence in order to diversify its economy and spark much needed economic growth.

Certainly, great trade potential exists, especially when channeled through Oman’s maritime economy and growing port infrastructure from Salalah to Duqm and Sohar.

According to recent estimates, bilateral trade is projected at approximately $1 billion with an expansion to $3 billion annually during the next several years.

Iran and Oman also appear poised to move forward on the construction of the 200-km undersea gas pipeline from Kouh-e Mubarak in Iran to Oman’s Sohar Port, a project that dates back to 2009 and is estimated to generate $60 billion in revenue over 25 years once completed.

Oman is well situated to expand its trade and commercial horizons throughout the region in ways that would help ease domestic tensions—whether questions of political succession or economic development.

There is little doubt that an economic boost will offer some stability in the southwest corner of the Arabian Peninsula amid an arc of instability.