That story took a new twist on March 3 when Iranian president Mahmoud Ahmadinejad arrived in Riyadh to the warm embrace of King Abdullah, the ruler of Saudi Arabia and a longstanding ally of the US.

The image - and the accompanying pledge by the two leaders to resist any attempt to spread the sectarian conflict in the Middle East for the good of the region in particular and the Muslim world at large - was in dramatic contrast to the Sunni-Shi'ite conflict raging in Iraq. The image also stood in contrast to speculation in Washington about the rivalry between Saudi Arabia and Iran intensifying to the point of each funding and training sectarian militias in Iraq to engage in full-scale civil war.

To assess the significance of the apparent beginning of detente, one needs to transcend the exclusively sectarian framework constructed recently. Viewed from the perspective of history, the Iran-Saudi relationship would confirm Lord Palmerston's aphorism that enemies are not permanent, but interests are.

Yet the ongoing Sunni-Shi'ite violence in Iraq has coloured the view of US policymakers to such an extent that many now can't help but view the Muslim world through the sectarian prism. In the eyes of US strategists, Iran's power amounts to a security threat, as the Saudi kingdom contains a quarter of the globe's oil reserves.

This concern about Iranian power has led US officials, including Vice President Dick Cheney and Secretary of State Condoleezza Rice, to demonise predominantly Shi'ite Iran. They assert that Sunni Saudi Arabia, Egypt, Jordan and the small Gulf monarchies are threatened by the emergence of a super-confident Iran, intent on acquiring nuclear weapons. However, the recent dispatch of carrier battle groups to the Gulf and heightened speculation about a US attack on Iran could just be sabre-rattling meant to create division in the Iranian leadership. There are also reports that Saudis are trying to restrain both sides.

An overview of the relations between Iran and Saudi Arabia since the 1979 Islamic revolution in Iran shows periods of intense rivalry and active cooperation.

With Ayatollah Khomeini, the radical founder of the Islamic Republic, declaring monarchy un-Islamic and attacking the hereditary rulers of the Arabian Peninsula, his regime alienated all the monarchs of the Gulf. Tehran's relations with the Saudi kingdom soured further when the latter sided openly with Iraq during the Iran-Iraq War.

Yet when oil prices collapsed in the spring and summer of 1986, hurting the economies of both Saudi Arabia and Iran, King Fahd met the Iranian oil minister that October. They backed the idea of a fixed price per barrel. In other words, economic interests led to a convergence of the policies of the two leading Islamic states in the Gulf.

As it is, both Iran and Saudi Arabia are fundamentalist states, both administered according to Sharia law. The difference is that Iran has a representative system whereas Saudi Arabia is a monarchical autocracy.

Following the end of the Iran-Iraq War and the death of Khomeini in June 1989, overall relations thawed between Tehran and Riyadh. This trend was aided by the subsequent election of Ali Akbar Hashemi Rafsanjani, a pragmatic cleric, as president of Iran.

Rafsanjani had a cordial meeting with Saudi Crown Prince Abdullah in March 1997 in Pakistan. This paved the way for Iran to host the triennial summit of the Islamic Conference Organisation (ICO), headquartered in Jeddah, in December. By then, Muhammad Khatami, a moderate cleric, had succeeded Rafsanjani.

The hosting of the ICO summit by Iran, which is 90 percent Shia, was remarkable. Of the 49 members of the ICO, only four were Shia-majority states. Breaking with protocol, Khatami had two private meetings with Saudi Crown Prince Abdullah. Their talks centred on Iraq, Lebanon and the Palestinians. Within days of this summit, the Iranian government announced it would attend the meeting of Iraq's neighbours and the permanent members of the UN Security Council in Baghdad on March 10 to find ways of stabilising security in that hapless country.

Reports from Beirut mentioned a wave of optimism unleashed by the Ahmadinejad-Abdullah meeting, defusing the three-month-old stand-off between the Riyadh-backed government of Sunni PM Fouad Siniora and the Tehran-backed Shi'ite Hezbollah leading the opposition.

Ignoring Washington's objections to the timing, King Abdullah has decided to revive the 2002 Saudi Arabian Middle East peace plan - offering Israel recognition by all Arab states in return for its evacuation of Arab land occupied since the 1967 Arab-Israeli War - at the Arab League summit in Riyadh later this month. Remaining opposed to the idea of recognising Israel under any circumstances, Iran views Abdullah's move as benign.

How Iran and Saudi Arabia end up dovetailing their policies to de-escalate the Sunni-Shi'ite violence in Iraq will only become clear at the forthcoming conference in Baghdad to be followed by a ministerial meeting in April. All things considered, Iran and Saudi Arabia have so far stood at opposite poles in their foreign policies.

Tehran has backed radical movements in the Muslim world irrespective of their sectarian allegiance: Hamas, for instance, is a Sunni organisation. Riyadh, on the other hand, has supported orthodox and fundamentalist forces among Sunni Muslims. It was one of only three countries that recognised the Taleban in Afghanistan.

Yet it's also true that when Iranian and Saudi leaders find their rivalry is undermining economic or diplomatic interests, they adopt a pragmatic stance and close ranks in the name of Islamic solidarity.

Dilip Hiro

YaleGlobal

LONDON

Dilip Hiro is the author of "The Iranian Labyrinth", and most recently, "Blood of the Earth: The Battle for the World's Vanishing Oil Resources", both published by Nation Books, New York.

Copyright: Yale Centre for the Study of Globalisation.