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After four days of negotiations in Beijing, an agreement has been reached between Saudi Arabia and Iran to restore diplomatic ties. While reactions from pundits and politicians have ranged from euphoria to cynicism to outright hostility, reality dictates that cautious optimism is the better course.

Here are a few observations on what just happened and why, and what needs to happen next: 

It is significant that China brought the parties together. For domestic political reasons, the US could not and would not play that role, and the diplomatic vacuum opened the door for Beijing.

The stage was set with US miscues in the region, beginning with the Bush administration’s disastrous war in Iraq, the Obama administration’s shortsighted approach to the Iran nuclear deal and the Trump administration’s unpredictable actions. American hubris, erratic behaviour and lack of concern for allies’ needs led one Arab intellectual to describe the past two decades of US policy as “a dizzying roller coaster ride and we want to get off”.

No longer confident of US support, some Arab states drew closer to China and Russia and even began inching their way toward normalising relations with Iran. UAE restored diplomatic ties and Saudi Arabia began exploratory meetings in Baghdad with Iranian counterparts.

It fell to China, which has been expanding economic ties with both Iran and Arab Gulf countries, to close the deal by playing the needed diplomatic role to facilitate an agreement. The China/Saudi Arabia/Iran pact not only envisions restored diplomatic ties, non-intervention, and respect for sovereignty, but also sets the stage for a regional economic summit later this year.

Recent polling across the Middle East demonstrates China’s enhanced role at the expense of the US. While still considered a more powerful ally, the US is increasingly viewed as erratic and unreliable. Strong majorities in most Arab countries see China as the emergent power that will eclipse the US in the next 20 years.

We have sold Arab states weapons, invested heavily in the region, and, at times, provided needed security, but we have also been demeaning and demanding and too often failed to address the concerns of Arab regional partners. As Saudi Arabian leaders have told US presidents going back to Bush: “If you insist on acting according to your interests, even when they conflict with ours, then we will act according to our interests, even when they conflict with yours.”

As this China/Saudi Arabia/Iran agreement illustrates, as a result of our hubris we may no longer be, as Madeline Albright often declared, “the indispensable nation”.

That said, declarations that “peace is at hand” are premature. Iran and Saudi Arabia will establish relations and China will parlay its economic ties with both countries and others in the region to broaden the framework, but the big remaining question is whether Iran will and can reduce regional tensions by reining in its regional allies.

Iran has invested heavily in supporting proxy militias in Iraq, Syria, Lebanon and Yemen. If willing, Iran may be able to exercise some restraint and control. But even if they reduce financial and military support, it is unclear whether the destabilising groups they have backed will submit to their dictates. Deep-seated sectarian and structural conflicts remain in each of these countries, which Iran did not create, but instead exploited and helped to exacerbate. One measure of how serious Iran is about peaceful coexistence and focusing on trade, development, and promoting prosperity for its own people and the region, is its willingness to participate in regional efforts to stabilise the countries in conflict by ending support for its militias and working with Saudi Arabia and others to achieve political solutions.

If the China/Saudi Arabia/Iran pact can be built upon, it could represent a major transformation of the region. This outcome is far from assured and will require heavy lifting and good faith of all parties, especially Iran.

If the US were smart, it would recognise the new game afoot. We can either remain on the sidelines, like Israel, shell-shocked, finger-pointing, and bad-mouthing this development, or we can seize this opportunity and offer to support and participate in expanding a regional peacemaking effort. I hope we choose the latter option, but fear we’ll choose the former.