Oman’s Foreign Minister Yousuf bin Alawi bin Abdullah was in the United Stateslast July 2018to meet with Defence Secretary James Mattisand discuss cooperation on regional affairs. After a few months of relative coldnessfrom the Trump administration, this warming up between Oman and the US has triggered renewed conversations amongst observers about the role of Oman as a regional mediator and a partner to the US. The visit of bin Alawi to Tehran right after, also fed rumours that the Omani diplomatic back-channel between Washington and Tehran could be revived, as it was the case under Obama for the negotiations of the Iran nuclear deal.

However, President Trump’s position on Iran suggests that,this time, Washington is less interested by Oman’s mediationskills than willing to pushthe Sultanate toalignon its anti-Iran rhetoric, making it increasingly challenging for the Sultanate to maintain its neutrality.

Indeed, since Sultan Qaboos’ arrival into power in 1970, Oman has built a unique foreign policy model in the Gulf, based on neutrality and mediation in regional rivalries. At a time whenthe Europeans are trying to save what remains of the Iran nuclear deal, to support UN peace efforts in Yemen, and to appease intra-GCC tensions, they critically need a neutral partner in the region,able to mediate between regional powers. An alignment of Oman towards one or the other side would exacerbate the regional polarisation and make Europe lose a crucial ally.

Since the creation of the Gulf Cooperation Council (GCC) in 1981, Oman has been careful to maintain a certain distance with the regional geopolitics and competing ambitions of its neighbours, keeping a neutral position on most of the internal rivalries. Oman has for example opposed in 2013 projects of further integration of the GCC into an economic and political union, fearing that this would lead to increased dependency on Saudi Arabia. It also did not join the Arab coalition in Yemen, and refused to align with the Saudi and Emirati stance on Iran and Qatar, maintaining close diplomatic and economic ties with both countries despite the pressures of its Gulf allies.

This neutral policy has allowed Oman to play a role of mediator and facilitator in several regional conflicts, such as the Iran-Iraq war in the 1980s, Syria, Libya, or more recently in Yemen, allegedly hostingsecret talks between the Houthis and Saudi Arabia.

But more importantly, Oman has developed a very special relationshipwith Iran. The two countries have been close partners since Iran helped the Sultanate to crush the Dhofar revolution in the 1970’s and have since then developed their political and economic partnership. They organised their first joint military exercises in the Strait of Hormuz in 2014, and have signed multiple oil and gas cooperation agreements for the exploitation of the Henqam gas field and the construction of a joint pipeline. Oman has therefore become a natural diplomatic backchannel between Washington and Tehran, and has played a key role in hosting and facilitating the secret negotiations of the Iran nuclear deal.

If until now Oman had managed to maintain this very particular policy of neutrality, the recent shifts in regional dynamics have made it increasingly challenging. The rapid transformations within the Saudi leadership and the support of the Trump administration have emboldened the Saudi Kingdom to embrace a more aggressive posture towards Iran. The young Saudi Crown Prince, Mohammed bin Salman, and the Emirati ruler of Abu Dhabi, Mohammed bin Zayed, have rapidly created a Saudi-Emirati alliance driving Gulf dynamics and embracing an emboldened foreign policy. In the meantime, the Qatar crisis has deeply harmed GCC coordination and pushed Qatar closer to other powers such as Iran and Turkey.

In this context, Oman has had difficulties to maintain the balance between its different partners and has felt increasingly isolated. Recent leaks published by Lebanese pro-Hezbollah newspaper Al Akhbarin July 2018 suggest that the UAE have allegedly threatened Oman to receive the same fate as Qatar if it maintains its current policy, although the UAE denies the veracity of these documents.

The increasing Emirati influence around Oman’s borders, whether it is on the Musandam Peninsula, or on the Yemen side, where it is very active in the border region of Mahrah, has been perceived by Oman as an attempt to vassalize and encircle the Sultanate. A few years after an Emirati spy network was allegedly discovered in Oman in 2011, the relations between the two countries remain full of suspicion.

On another hand, Oman is cautious not to fall into the Qatari or Iranian orbit. Qatar especially, in the wake of the GCC crisis, has developed a lot its trade relations with Oman. The blockade has constrainedQatar to redirect some maritime routes towards the port ofSohar in Oman, and bilateral trade volumes between the two countries witnessed a sharp increase of 200% in only one year. However, Oman remains waryof Qatar’s own ambitions in the region and is cautious not to antagonise the Saudis and the Emiratis who remain key partners. Its agreement for example to join the Saudi-led Islamic coalition against terrorism in December 2016 was a way to make a positive step towards Saudi Arabia, withoutat the same time making any concrete commitment.

Oman is particularly sensitive to these external pressures. At a time when it faces important economic hardship due to the decrease of oil prices and political uncertainty over the succession of Sultan Qaboos, it has become increasingly challenging for the Sultanate to maintain its neutrality. While it has often refused investments and aid funds from countries of the region, fearing that this would undermine its independence, it has breached this principle this year by accepting money from Saudi Arabia and Qatar for the development of its ports and infrastructures.

If Oman is making an exception to this principle, it is because it hopes to take advantage of its strategic location to develop its ports and trade infrastructures, and therefore increase its political leverage towards its powerful neighbours. Indeed, Oman’s position over the strait of Hormuz, which controls two thirds of global oil traffic, could be an important economic asset. Moreover, in the context of the expanding Chinese Belt and Road Initiative (BRI), the Indian Ocean has become over the past few years a theatre of contest for regional influence between China and India. In this context, attracting Asian investments could be a way for Oman to diversify its economic partners and improve its leverage towards its Gulf neighbours. Oman has already managed to attract the interest from the two Asian powers, getting important investments from China for the development of its port of Duqm, accompanied with a 10.7 billion dollar project of Chinese industrial park near the port. India has also shown interest in Oman and its port of Duqm. In February 2018, India’s Prime Minister Narendra Modi encouraged Indian businessmen to invest in Oman during a trip to the Sultanate, and earned the right for the Indian Navy to use Duqm’s facilities.

If these investments are providing Oman with renewed perspectives, there is still a long way to go before making Omani ports competitive and attractive, and theOmani economy remains fragile. As long as the very respected Sultan Qaboos is on the throne, Oman’s situation should remain stable. But as the health of the Sultan is degrading and no heir has been officially designated, the transition of power might make the Sultanate much more vulnerable to both internal dissensions and external pressures.

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