Oman-Iran Trade MoU: Building on Gaza Cooperation
After signing a strategic partnership with Russia, Iran pursues free trade with Oman, building the first blocks for a potential AoR market
Last week, during the 21st Joint Oman-Iran Committee meeting, the Sultanate of Oman and the Islamic Republic of Iran signed a Memorandum of Understanding (MoU) to establish a preferential trade agreement and eliminate tariffs, with implementation beginning this week. This agreement marks another significant milestone in the growing relationship between the two nations over the past few years. Oman’s strategic location between the Strait of Hormuz and the Bab el-Mandeb Strait has prompted the Sultanate to adopt a pragmatic foreign policy that balances interests from both East and West. However, it appears that Oman’s traditionally neutral stance is becoming more assertive: driven by domestic pressures and the intensifying geopolitical tensions regionally and globally, the Sultanate may be shifting more towards a BRICS-aligned future
Bridging Iran, Its Allies, and the West
Oman and Iran share historical religious ties, with the majority of Omanis following the Ibadi sect of Islam, which, while distinct, shares some similarities with Shiite Islam. This makes Oman ideologically more aligned with Iran than with its neighbouring Gulf states, Saudi Arabia and the United Arab Emirates. This adds a strategic layer to Iran’s engagement with Oman, particularly concerning economic interests tied to the strategic Hormuz Strait. In this context, last week’s MoU aimed to strengthen their growing trade relationship by reducing barriers that Iranian investors have previously faced, especially in opening Omani bank accounts and navigating trade tariffs. Additionally, earlier this month, the Iranian Minister of Information and Communication Technology met with the Omani Ambassador in Tehran to discuss bilateral cooperation in the information and communication technology sector, leveraging Oman’s position as a regional hub for submarine cables.
As the poorest Gulf Cooperation Council (GCC) nation, Oman’s efforts towards economic cooperation have become increasingly vital in addressing pressing challenges, including youth unemployment, overreliance on oil, and slow economic diversification. The growing possibility of maritime conflict only adds urgency to these issues, prompting Oman to deepen its ties with both neighbouring countries like Iran and larger global powers to prepare for potential instability.
In addition to these economic and strategic initiatives, Oman has been capitalising on its friendly relations with both Iran and its adversaries by facilitating dialogue within the broader Middle Eastern geopolitical landscape. Renowned as a beacon of peace in the region, Oman is recognised not only for its neutrality and pragmatism amidst regional conflict but also for its enduring efforts to promote peace. This includes hosting indirect negotiations between Iran and the United States, receiving freed Yemenis from Guantanamo Bay, and playing a conciliatory role in the Gaza war—such as facilitating talks for the release of the crew of the Israeli ship held by the Houthis in Yemen. Oman has refrained from joining the GCC-led offensive against Yemen and has instead focused on facilitating humanitarian aid and hosting mediation talks between the Houthis, the Government of Yemen (GoY), and other political factions. These actions further emphasise Oman’s commitment to fostering peace and stability in the region.
A Move Toward the Axis of Resistance?
Economic woes are pushing Oman away from its traditional rentier state model, where reliance on oil revenues has historically dominated the economy in exchange for civil complacency. As the country moves away from this model, it is likely to see a more politically active and demanding population. Many Omanis, being overwhelmingly pro-resistance, could push for a larger Omani role in the Axis of Resistance (AoR). Omani officials have already been increasingly vocal in condemning Israel’s war in Gaza. Foreign Minister Sayyid Badr Albusaidi has made bold statements criticising Israel and its backers.
Such political alignments have impeded Oman’s full participation in the Abraham Accords market, despite previous talks and deals. The US has previously sabotaged Omani economic diversification ambitions with other countries, specifically Iran and China: the Omani-Iranian undersea gas pipeline has been stalled since 2013, and the 2017 Chinese investment in Duqm Port remains incomplete due to American pressure and sanctions on Chinese companies. Nonetheless, Oman’s largest trading partners include India and China, both foundational BRICS nations and the Sultanate are actively participating in China’s Belt and Road Initiative (BRI). Last year, Omani Energy Minister Salim Al Aufi set the implementation date for the Omani-Iran pipeline as "early 2025" at the latest. These developments, along with growing regional tensions and domestic pressure, indicate that Oman may take on a growing role in the Axis of Resistance. While the United States remains an important player in Oman's economic relations, the Sultanate's priorities—both economically and culturally—are increasingly oriented towards the East.