Oman and Iran: Peace dividends

BUSINESSMEN say that investor interest in Oman has jumped since the tiny Gulf state in 2013 hosted clandestine talks between America and Iran that led to the interim deal on the latter’s nuclear programme. Trade between the two countries reached $600m in 2013; up threefold from 2010. If sanctions on Iran are fully lifted, Oman will benefit further.

The tiny country of 3.3m has acted as a go-between for America and Iran since the Iranian revolution in 1979 that split the two former allies. As a Gulf friend of America, but also a maritime neighbour of Iran, which lies just 39km across the Strait of Hormuz, Oman didn’t have the luxury of picking sides. As Iran was isolated by sanctions, Oman’s rulers maintained that Iran had a role as a regional power.

In 2009, an opportunity arose for Oman to bring the two sides together. When three American hikers were arrested in Iran, Oman’s Sultan Qaboos sent an envoy to broker their release, footing the $1m bill for bail. Later, he offered up his villas in Muscat for talks. Despite one of them being in the fancy Qurum area where the elite live, the meetings remained secret.

Oman’s role has gone down well at home. Locals are proud, helping to subdue discontent that has simmered since 2011 when small protests erupted in several cities. The sectarian tone of conflicts in Syria, Iraq and Bahrain has spooked many Omanis, over half of whom are Ibadis, an offshoot of Islam that is neither Sunni nor Shia. Bringing Iran back into the international fold, they argue, could limit Tehran’s urge to seek asymmetric influence through conflict and deflate some of the anti-Iranian rhetoric from arch-rival Saudi Arabia.

Perhaps as importantly, over hundreds of years as a trading nation, the Omanis have learned that peace is good for business. The United Arab Emirates has long hosted an Iranian community and informal trade. But while some small business and oil smuggling goes on in Oman’s north, the country is starting from almost scratch.

“I don’t think His Majesty [Sultan Qaboos] had in his mind, we will broker this because we will get this,’’ says Muhammad Mahfoudh al-Ardhi, a former Omani air force chief who sits on the board of the National Bank of Oman. But since the talks became public, he says the real estate market is going up, foreign investments are coming in and the Iranians have shown more interest in investing.

Trade delegations now shuttle between the two countries. In January, an Iranian firm won the contract to manage Oman’s Khasab port. On February 10th Iran’s ambassador in Muscat said Tehran will invest $4 billion in Oman, including in Duqm, an economic zone that will host a port, gas export facilities, an airport, an industrial area as well as hotels and swish resorts. A pipeline is planned between the two countries so Iran to sell gas to Oman, which has spare capacity to ship the LNG further afield. This could both alleviate Tehran’s budget crunch and help Oman meet exports to South Korea and Japan as well as rising local demand.