Saudi Arabia’s Predicament: Why Riyadh Is in a Strategic Bind and Why That Matters for Malaysia

Murray Hunter


Saudi Arabia’s Predicament: Why Riyadh Is in a Strategic Bind and Why That Matters for Malaysia

Samirul Ariff Othman
Mar 15, 2025





Saudi Arabia is in a tight spot—politically, militarily, and geopolitically. It is the world’s largest oil exporter, home to Islam’s holiest sites, and a key U.S. ally in the Middle East. But beneath its wealth and influence lies a deeply complex set of challenges that are testing its stability. From internal sectarian tensions to a costly war in Yemen, from an existential rivalry with Iran to doubts about its military capabilities, Riyadh is finding itself stuck between a rock and a hard place.

First, there’s the domestic Shia question, a persistent issue that Saudi leaders cannot ignore. While Saudi Arabia is a majority Sunni country, about 10-12% of its citizens are Shia, and in the oil-rich Eastern Province, that number climbs to 25-30%. Cities like Qatif and Al-Ahsa have seen periodic unrest, fueled by decades of perceived discrimination and economic marginalization.

To make matters worse, Bahrain—Saudi Arabia’s small but strategically crucial neighbor—has a Shia majority of 55-70%, but its ruling family is Sunni. This creates a perfect opening for Iran, which Riyadh fears could exploit sectarian divisions to expand its influence right at Saudi Arabia’s doorstep.

Then there’s Yemen, where Saudi Arabia has been stuck in a war with the Iran-backed Houthi rebels since 2015. The Houthis, who come from Yemen’s Zaydi Shia community (making up 35-45% of Yemen’s population), have turned the conflict into a proxy war between Saudi Arabia and Iran. The Saudis, with their vast military budget and advanced Western weaponry, thought they could crush the Houthis in a matter of months. Instead, the war has dragged on for nearly a decade, with no clear victory in sight.

The Houthis have only grown stronger, launching drone and missile attacks deep into Saudi territory, including the devastating 2019 strike on Saudi Aramco’s oil facilities. That attack exposed Saudi Arabia’s vulnerability in a way few had imagined, shaking confidence in the kingdom’s ability to defend itself despite its massive arms purchases from the U.S. and Europe.

Which brings us to Saudi Arabia’s broader military dilemma. The kingdom has invested heavily in American and European fighter jets, tanks, and missile defense systems. It also possesses Chinese-made DF-3 and DF-21 ballistic missiles, which are capable of reaching Iran. But for all its firepower, Saudi Arabia lacks nuclear weapons—a key deterrent that its regional rival Iran is inching closer toward. Riyadh has long been rumored to have a “nuclear insurance policy” with Pakistan, given their close strategic ties. But so far, it remains just that—speculation.

Of all the threats Saudi Arabia faces, Iran remains the biggest and most persistent. For Riyadh, the Iranian regime represents both a sectarian rival (Shia vs. Sunni) and a geopolitical threat, as Tehran continues to back regional militias like Hezbollah in Lebanon, Shia factions in Iraq, and, of course, the Houthis in Yemen.

Even in Bahrain, Iran has been accused of supporting Shia opposition groups, a move that Saudi Arabia sees as direct interference in its sphere of influence. When Bahraini Shia protesters took to the streets in 2011 demanding reforms, Saudi forces—along with the Gulf Cooperation Council (GCC)—swiftly intervened to crush the movement, fearing it could turn into an Iranian-backed uprising.

But the biggest paradox in Saudi Arabia’s strategy is this: for all its military spending and alliances, it has struggled to project power effectively. Despite billions poured into defense, it has failed to decisively defeat the Houthis, raising serious questions about the kingdom’s military capabilities. This weakness has forced Riyadh to rethink its approach to Iran, culminating in a China-brokered diplomatic rapprochement in 2023. Whether this shift is a genuine thaw or simply a temporary de-escalation remains to be seen, but one thing is clear—Saudi Arabia is now realizing that diplomacy, not just firepower, will play a key role in its survival.

So here’s where it all comes together: Saudi Arabia is trapped in a multi-front strategic bind. It faces internal Shia unrest, a failed military campaign in Yemen, an emboldened Iran, and growing doubts about its military effectiveness. At the same time, its closest allies—the U.S. and the West—are increasingly prioritizing their own interests, including potential deals with Iran. Saudi Arabia might still be a powerhouse in the Middle East, but its ability to shape the region on its own terms is being seriously tested. And that’s why Riyadh is in a pickle.

Why it matters to Malaysia?

Saudi Arabia’s internal and external struggles—ranging from its Shia minority issue to the Houthi insurgency in Yemen and its rivalry with Iran—have far-reaching consequences, including for Malaysia. Given Malaysia’s strong ties with Saudi Arabia in energy, trade, and Islamic diplomacy, these challenges matter more than they might seem.

Oil is a key concern. As a major supplier of crude oil to Malaysia, any instability in Saudi Arabia—whether from unrest in its oil-rich Eastern Province or Houthi attacks on Aramco facilities—could disrupt production and drive up global oil prices. While Malaysia is a net energy exporter, its reliance on imported refined petroleum products means higher costs could hit businesses and consumers, adding to inflationary pressures.

Geopolitically, Saudi Arabia’s shifting alliances also impact Malaysia. If Riyadh strengthens its ties with China following the 2023 Saudi-Iran rapprochement, it could tilt the regional balance of power, affecting Malaysia’s own strategic positioning between the U.S. and China. Any realignment in Saudi influence could alter trade, investment, and security dynamics in ways Malaysia must carefully navigate.

And let’s not forget the religious dimension. Malaysia, like Saudi Arabia, is a Sunni-majority nation, and the kingdom has long positioned itself as the leader of the Islamic world. But the Saudi-Iran rivalry has a sectarian undercurrent, and with Bahrain’s Shia majority being a persistent concern for Riyadh, the question of how Malaysia manages its own small but visible Shia population becomes more relevant. While Malaysia has maintained diplomatic ties with Iran, it has also taken cues from Saudi Arabia in regulating religious discourse. If tensions escalate, Malaysia could face pressure to take a harder stance on domestic Shia communities, impacting religious harmony at home.

Meanwhile, the Yemen conflict poses economic risks. The Houthis have disrupted Red Sea shipping routes, threatening Malaysian exports to Europe and the Middle East. If tensions escalate, trade disruptions could hurt industries like palm oil.

Finally, Saudi Arabia’s declining influence raises questions about Islamic leadership. Malaysia, having hosted the 2019 Kuala Lumpur Summit as an alternative to Saudi-led initiatives, may find an opportunity to shape the global Islamic agenda.

Ultimately, Saudi Arabia’s challenges extend beyond its borders, and Malaysia must stay alert to their potential impact on its economy, trade, diplomacy, and religious affairs.

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Economist Samirul Ariff Othman is an international relations analyst. He completed his graduate studies at Macquarie University in Sydney, Australia. The views in this OpEd piece are entirely his own.