Sunni dominated Saudi Arabia is facing a challenge in the Middle East
from its Shia dominated neighbour. Both are engaged in rivalry for
domination over the islamic countries in Middle East and Oil policy.
Saudi Arabia though has a higher standard of living and larger oil
reserves has a lower population. Iran has a lower standard of living
due to its conflict with Iraq and US Sanctions.
The Saudi Backing to Syrian Rebels working to overthrow the dictator
Assad. The Iran, Russian alliance has been instrumental in helping
Assad's forces to continue their reign. Russia has blocked UN Security
Council sanctions against Syria.
The Western allies to want to intervene against the Dictator but
Russia has continually blocked this. The Syrian region is Sunni
dominant but with a Shia leadership. Hence Saudi is backing the Sunni
rebels against the Shia forces of Assad which are supported by Iran.
This has lead to a proxy war between the two.
Yemen is a muslim dominant state with Shia militia "Houthis"
backed by the Iranian state and Yemen leadership backed by Saudi
Arabia. Houthis had captured the Yemen capital and now had their
parallel government running the Country. This had been a major
embarrassment for Saudi Arabia.
This country has equal population of Shia and Sunnis. Here
too the Shia dominated militia Hizbollah has managed to impose its
leader as President of State.
It is Shia majority country now with good ties with Iran. The
Islamic state is engaged in war with Shia rebels [supported by Iran].
Saudi Arabia closed diplomatic relations with Iran after its embassy
in Iran was attacked. This was due to executions of Shia clerics by
Saudi Arabia on accusations of spying for Iran.
The main source of income and power for Saudi Arabia was the
export of oil. But with prices at all time low it can't sustain its
proxy war and funding of rebels engaged in conflicts. Already the
Saudi favoring countries like Eqypt and Lebanon have now looked
towards Iran as their free shipment of oil was cancelled by Saudi.
It needs oil to be above $80 per barrel for breaking even. Hence it
agreed with Iran to cut production to increase prices.
Iran meanwhile obtained a greater bargain by getting the OPEC to
increase Iran's quota so that it could recover from the sanctions
imposed by US.
American President elect Donald Trump has threatened both sides. Saudi
Arabia now faces a challenge as JASTA a new law might be revived where
American citizens might sue it for damages due to 9/11.
Trump also has threatened to reimpose sanctions on Iran due to its
Nuclear program. This however even Saudi Arabia doesn't want.