War with Saudi Arabia is not possible: Iran

Iranian Foreign Minister Javad Zarif
World Economic Forum
Iranian Foreign Minister Javad Zarif

Diplomatic relations between two of the Middle East's powerhouses may be at a new low but a military conflict between Iran and Saudi Arabia is not a possibility, Iran's foreign minister said on Wednesday.

Relations between the two countries, which are largely divided down sectarian lines with Shiite-majority Iran vying for influence in the Middle East against Sunni-led Saudi Arabia, hit a low point earlier this month following the Saudi execution of a leading Shiite cleric Sheikh Nimr al-Nimr.

In retaliation for the execution, the Saudi embassy in Tehran was attacked and, despite condemnation from the Iranian government on the attack, Saudi severed diplomatic relations.

A war of words has followed but Iran's foreign minister tried to assuage fears that a deeper military conflict could be brewing.

"(Will there be a war?) No. I think our Saudi neighbors need to realize that confrontation is in the interest of nobody," Javad Zarif said, speaking at a panel on Iran's future at the World Economic Forum in Davos.

"There is no threat coming from Iran to any of its neighbors…and are prepared to engage with confidence-building measures with our neighbors."

Hopes of a new era of economic prosperity and political inclusion emerged over the weekend when 10 years of sanctions against Iran were lifted after the country convinced international inspectors that it had curtailed its nuclear ambitions.

The ending of sanctions against the country, which have isolated it economically and diplomatically, came after a landmark nuclear deal between Iran and global powers.

Zarif said that the origin of the breakdown in relations with Saudi Arabia came in 2013 when a preliminary nuclear deal was reached, making Saudi Arabia nervous.

"I want to make a point though that since the agreement in Geneva in 2013 our Saudi neighbors have been panicking but there is no need to panic, our friends. Iran is there to work with you and Iran doesn't want to exclude anyone from this region. There is no need to engage in a confrontation."

Zarif said those that had attacked the Saudi embassy were being prosecuted but that Saudi had been "looking for an excuse to break diplomatic relations."

"We should try our best, as Iran has done, to exercise self-restraint and to come to our senses and engage in serious discussions." He added that extremism and terrorist groups such as the so-called Islamic State were a common enemy that needed to be defeated.

More hostility with its neighbors is the last thing Iran needs as it takes the first steps to get its beleaguered economy, isolated by a decade of sanctions, back on track.

Mohammad Agha Nahavandian, chief of staff of the Presidency of the Islamic Republic of Iran, told the WEF audience that Iran had the potential to see its gross domestic product (GDP) expand 8 percent.

"Iran has the potential to come out of this recession and sanctions with a growth rate of 8 percent, that's feasible, being mindful of the fact that there are so many global companies who have expressed interest in the energy sector, ICT and transit routes in Iran, be it railway, roads or airways," he said.

"Of course, there are things to be done and the administration is mindful of the fact that the business environment has to improve a great deal and we've already started that," he added.

Follow CNBC International on Twitter and Facebook.