Omani-Iranian relations have always followed a path of positive neutrality on many sensitive issues in the Gulf region. The Muscat-Tehran alliance should be understood within the context of Oman’s independent approach to foreign policy matters, led by Sultan Qaboos bin Said, who since taking power in 1970, has managed to strike a balance between the conflicting interests of Oman’s larger and more powerful regional neighbours.
Oman is the only GCC (Gulf Cooperation Council) country to maintain good relations with Iran. It has always adopted a more open stance towards Iran, which at times goes contrary to the Gulf consensus on many regional issues, however, without causing major antagonism and whilst keeping its door open for dialogue with all its Gulf neighbours.
The Sultanate of Oman enjoys strong ties with Iran, although these have not been free of wars and conflict in the past. The geographical reality of each country has imposed certain common interests on the two states which share control of the entrance to the Gulf. After Sultan Qaboos took power, political cooperation between the two countries underwent major transformation, as demonstrated by Iran’s military support against the Dhofar uprising, when some of the other Gulf states in fact officially supported and trained the rebels.
In return, the Sultanate has repeatedly sought to bring Iran and the other Gulf states closer to each other. There have been many instances when Sultan Qaboos has called for closer ties between Iran and its neighbours. For example, in 1976 Sultan Qaboos called for talks to be held among the eight Gulf states overlooking the Gulf, in the hope of bringing the views of the two sides closer to each other and removing the historical misunderstandings between the Gulf-Iranian sides. Unfortunately, the talks did not yield any significant progress.
In the period following the Iranian Revolution and the establishment of the Islamic Republic in the late 1970s, Oman maintained its strategic neutrality despite the insistence by some Gulf states on unifying Gulf ranks against Tehran. Even after the outbreak of the Iran-Iraq war in 1980 – which lasted about eight years – Oman adopted a policy neutrality, just as the Sultanate refused calls to break with Tehran. However, and at the same time, Oman did not stand completely with Iran; and in this Oman differed significantly from the other Gulf countries who supported Iraq at the time.
Not only did Oman remain neutral with Tehran, it also played the role of mediator in many regional crises between Iran and the Arab states, Western countries and the United States of America, including the hosting of secret talks between Iraq and Iran for a cease-fire during the Iran-Iraq war. Oman also refused calls for Iran’s boycott and the country’s diplomatic and economic isolation in 1987 – in a dispute between Iran and the United Arab Emirates over the return of the three islands occupied by Iran in the Gulf – and also refused to allow Iraq to use its territory to strike Iranian islands. Oman also mediated the restoration of relations between Iran and Saudi Arabia after the Iran-Iraq war. It was also a mediator between Iran and Egypt after the Islamic revolution in Iran and helped secure the freedom of the Egyptian prisoners held by Iran during the years of the war with Iraq.
In 1990-1991, during the second Gulf War, tensions mounted between the two countries after Iran deployed anti-ship missiles near the Straits of Hormuz. This resulted in Oman intensifying its military presence on the southern island of Musandam, overlooking the Straits of Hormuz, 60 km from the Iranian border.
However, it was not long before tensions between the two sides subsided, and relations resumed their usual collaborative nature. Soon after the situation between the two countries normalised, the Sultanate successfully mediated on several issues, including: the liberation of British sailors who were held in Tehran in 2007; and in 2011 the release of American hostages.
In addition, Oman took upon itself the representation of Iranian interests in some Western countries. Also, throughout the period of negotiations between Iran and the West, Muscat played a major role in the settlement of the Iranian nuclear file. In an interview with America’s Fox News, Sultan Qaboos bin Said confirmed that “Iran and the United States should sit down together and talk.” This statement was but an indication of what was going on behind the scenes, with Omani diplomacy proving hugely positive in the dialogue between the two sides.
Over the same period, Oman hosted a series of secret meetings between Iran and the United States in an attempt to reach a common ground; which successfully culminated in the Geneva Accord in November 2015 between Iran and the P5 + 1 group ((the five permanent members of the United Nations Security Council—China, France, Russia, United Kingdom, United States—plus Germany), and the European Union).
Economic cooperation between Oman and Iran
The policy deployed by the Sultanate in its dealings with Iran points to Oman’s emergence as an important trading centre linking Iran with several other continents.
It is evident that the Sultanate often operates outside the confines of the GCC. Oman’s commercial, cultural and geographical ties extend back to its history as an empire, whose rule extended across the Arabian Peninsula and the Indian subcontinent; bordered to the north by Iran and Pakistan; to the east by the Indian subcontinent, and to the west by the Arabian Peninsula and the Horn of Africa. Oman’s relationship with the Indian Ocean countries is a clear illustration of the importance accorded by Sultanate to these relations.
Today, following the end of Iran’s international isolation and its deliverance from the sanctions it had endured for years; the Sultanate has fresh opportunities to consolidate its position with the Indian Ocean countries. Last year, in connection with the first joint action plan between the two countries, the Iranian ambassador in Muscat told the ‘Oman Observer’: “The Accord is the result of the hosting by Oman, at the start of the journey, of several meetings here in Muscat, as well as the wisdom and cognisance of Sultan Qaboos. It must be emphasized that the Sultanate has been the most prominent in moving the negotiations forward from the beginning; having made great efforts, for which it has our gratitude, in bringing closer the views of officials whether in Iran or America and the 5 + 1 nations.”
The Ambassador also remarked once again about economic and trade relations with the rest of the world, saying: “In the existing positive environment, what is needed is political and economic engagement for profit; and this profitability, from now on, will first be made available to our brethren in the Gulf countries, led by Oman, which has stood by us in our time of need and will be given priority in the exchange of trade, especially as it is on the verge of embarking on large projects over the coming years and will be the main point of transfer for goods through the port of Duqm.”
Politics aside, Iran carried out its promise to its Omani neighbour last March  when it announced the launch of the first joint car manufacturing plant, worth $ 200 million, named ‘Orchid International Motors.’ The aim is to establish the largest automobile factory in the city of Duqm, located along the Sultanate’s coast on the Arabian Sea. The Omani-owned investment fund shares ownership of the project with the Iranian company ‘Iran Khodro’, Iran’s largest car manufacturing company and an Omani investor. The Iranian company began operating this year and is expected to produce 20,000 units by the middle of 2018.
The CEO of ‘Iran Khodro’, Hashem Yakka Zari announced that only 5,000 units are targeting the Omani market and the other 15,000 units will be exported to countries such as Ethiopia, Eritrea, Sudan and Yemen. Iran has several projects in the pipeline in Oman, including ones in the fields of nanotechnology, construction and the construction of a hospital complex.
Iran Khodro also signed a $ 436 million deal in January last year that allows French company Peugeot Citroen to produce 200,000 cars a year at full production. The company will be a partner in both production and profits, according to Iran’s ‘Financial Tribune’ newspaper.
Bilateral cooperation in energy, oil and gas
The rapid and successive collapse of oil prices in recent years has caused great concern among the producing countries – such as Oman – which has plunged the Gulf country into a financial crisis, in a similar manner to other Gulf states. Hence, Oman’s policy has been to diversify its sources of income to overcome fluctuations in the price of oil. We find that 21 years ago, the Sultanate developed a vision for the year 2020, in which it aims to develop the economy, increase non-oil revenues and invest in the country’s human capital.
In 2013, Iran, Oman and India agreed on the construction of a 1,300 km long undersea gas pipeline from Iran, through Oman and then to Gujarat in western India.
Oman is moving towards exporting liquefied natural gas (LNG) to meet world demand rather than oil. The import of Iranian gas for domestic consumption is likely to free up the sale of more locally produced LNG to other foreign countries.
Oman offers Iran a launching pad from Central Asia to the Indian subcontinent and the Horn of Africa. The mere announcement of an agreement with Iran regarding the lifting of international sanctions led to a strengthening of Oman’s relations with Iran in the energy sector, as this represents an important step towards the building of commercial ties amongst the countries of this continent and the Sultanate of Oman. The Sultanate also opened its ports of Duqm and Salalah to the three continents. The prospects of this trade corridor led the Sultanate to work seriously towards diplomacy to facilitate trade cooperation between Iran and the outside world.
Oman’s ports, such as the port of Duqm, are important economic centres for trade and investment in the region. Some Gulf States have the opportunity to reap the benefits from Oman’s infrastructure and its access to the Arabian Sea and the Indian Ocean.
Oman is seen as a politically stable country, located in the south-eastern corner of the Arabian Peninsula, where it is surrounded by some of the world’s most sensitive geopolitical fault lines and important trade corridors.
However, serious disagreements remain between Oman and some of the other Gulf countries on many important issues in the region, from oil production to Saudi-UAE military intervention in Yemen, to name but a couple. The strengthening of ties between Muscat and Tehran allows it to gain geopolitical independence from Riyadh and the Gulf states; and if further sanctions are lifted from Iran, we will see progress and new opportunities for the Sultanate in the global economy.
The Sultanate of Oman shares the Straits of Hormuz with Iran and wants to maintain friendly relations with its neighbour. This is despite its membership of the Gulf Cooperation Council (GCC), the majority of whose members are hostile to Iran. The Sultanate has managed to overcome sectarian divisions in the region and maintain positive relations with all the regional powers. The Sultanate’s foreign policy has been to maintain a balance between the conflicting interests of its more powerful neighbours in order to advance its own interests. In the event Iran reintegrates into the global economy, the Sultanate will become a spring board for the Iranian economy; from whence it will strive to penetrate the African, Indian and Asian markets.
From the point of view of some of the Gulf states, Iran’s entry into the global economy is a troubling development, which resulted directly from the comprehensive joint action plan between Oman and Iran. The Saudis expressed their anger when they learned that their Omani counterparts had hosted secret talks on the nuclear deal between US and Iranian officials, and pursued its own diplomacy, independent of the GCC states. As Muscat and Tehran continue to strengthen ties between the two countries, these relations are likely to remain a source of tension in the GCC. Some GCC states have undoubtedly warned Oman against adopting an independent foreign policy that would weaken the collective security of the Arab Gulf States. The success of Oman’s diplomatic drive is likely to serve its own interests on more than one front in the region, for several reasons:
- Eliminating the spectre of war and military confrontation in the region, especially as it is not immune from what is happening in the surrounding Gulf region, by doing its utmost for the security of Oman and its internal stability.
- The success of Omani diplomacy and the enhancement of political confidence in the region.
- Strengthening ties between Oman and Iran on the one hand, and the United States of America on the other.
- It opens new horizons for economic cooperation between Oman and Central Asia via Iran, which is very important for the Omani economy.
1 – The view from the Gulf: America’s quiet go-between speaks http://www.foxnews.com/world/2012/01/31/view-from-gulf-americas-quiet-go-between-speaks.html
2 – Iranian Ambassador: Oman played a major role in pushing the negotiations to reach the nuclear agreement – http://ar.farsnews.com/iran/news/13940425000697
3 – Iran, India, and Oman, agree on a gas pipeline project (the agreement between Iran, Oman and India on the construction of a 1,300 km undersea gas pipeline) – http://fa.alalam.ir/news/3059516/
 The Dhofar Uprising was a movement against the government of the Sultanate of Oman and British colonialism at the time. Dhofar is the southern region of the Sultanate of Oman, and emerged in the sixties during the reign of Sultan Said bin Timor, the father of Sultan Qaboos and extended to the end of 1975.
 The view from the Gulf: America’s quiet go-between speaks-Fox News.
 Iranian Ambassador: Oman played a major role in steering the negotiations towards the nuclear agreement
 Iran, Oman and India agree to build a 1,300-kilometer-long undersea gas pipeline