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Malaysia is walking a neutrality tight rope

Kuala Lumpur is risking US' wrath over Iran oil trade which Washington believes is financing militant groups like Hamas
This handout photo shows Malaysia's Speaker of the Dewan Rakyat, Azhar Azizan Harun (fourth from right), and Speaker of the US House of Representatives Nancy Pelosi (third from left) posing with their delegation before a meeting at the Parliament House in Kuala Lumpur on Aug. 2, 2022.

This handout photo shows Malaysia's Speaker of the Dewan Rakyat, Azhar Azizan Harun (fourth from right), and Speaker of the US House of Representatives Nancy Pelosi (third from left) posing with their delegation before a meeting at the Parliament House in Kuala Lumpur on Aug. 2, 2022. (Photo: AFP) 

Published: May 13, 2024 04:56 AM GMT
Updated: May 13, 2024 06:29 AM GMT

Malaysia is too small a player to take sides in economic battles and power plays that involve global superpowers. It cannot afford to make enemies out of them.

Hence, the decision to only comply with sanctions imposed by the UN and not unilaterally applied ones.

This is what was conveyed to US officials who went to Kuala Lumpur to express Washington’s concern over US-sanctioned Iran allegedly using Malaysian companies to move oil to China with the oil revenue being used to finance militant groups like Hamas.

The US delegation, which included the Under-Secretary of the Treasury for Terrorism and Financial Intelligence Brian Nelson and Treasury General Counsel Neil MacBride, visited Singapore and Malaysia on May 6-9.

The US was obviously expecting a different response from the Malaysian government, but did Washington think that Malaysia would take a tougher stance against Iran, and by extension, China?

Malaysia has always maintained strategic neutrality in international relations. When the Ukraine-Russia conflict broke out, Malaysia along with its neighbors in Asean, remained neutral, and asked for both parties to resolve the conflict through diplomacy.

It is a totally different story when it comes to the Israel-Palestine conflict which has the religious dimension added to it. Malaysia has been clear and highly vocal about its stand for decades and does not have any diplomatic ties with Israel.

In fact, this conflict was one of the reasons diplomatic ties between Sunni Malaysia and Shia Iran got stronger about 40 years ago.

Malaysia had a good relationship with the Shah of Iran Mohammad Reza Pahlavi, but it was the years after the Iranian Revolution in 1979 that brought the two nations closer.

Malay Muslims celebrated the revolution as a victory for global Islam and that made them momentarily put aside their Sunni-Shia differences.

It was a pivotal time for Malaysia. The establishment of an Islamic theocracy in Iran strengthened the resolve of then prime minister Mahathir Mohamad to work towards a strong global Muslim brotherhood and help build international solidarity for Palestine. He saw in Iran a strong ally.

Iran at that time needed a friendly face in this part of the world to build itself up economically after a resource-draining war against Iraq, and a string of economic sanctions.

Up until 2022, Iran was the most sanctioned country in the world but was surpassed by Russia when it invaded Ukraine.

The ties between Iran and Malaysia grew and the importance of this relationship is evident with almost every Iranian president having made a state visit to Malaysia. The total value of trade between Malaysia and Iran reached almost US$850 million (RM4 billion) last year.

There was a brief hiccup in the relationship after Malaysia banned Shia Islam in 1996, declaring it deviant. Anti-Shia sentiments escalated during the Najib Razak administration especially when he extended military support to the Saudi-led coalition against Iran-backed Houthis in Yemen in 2015.

Since then, Malaysia has tried to balance its relationship with Teheran and Riyadh, trying not to side with one over the other.

It is this strategic neutrality that made Malaysia establish diplomatic ties with the then-Soviet Union in 1967 and China in 1974, the first Asean country to do so for both.

It is a case of survival for Malaysia, a small country with an open economy, to fight the temptation to pick sides, especially when it comes to the US and China.
China has in the last 15 years become Malaysia’s top trading partner.

In that time, Malaysia has seen a substantial inflow of investment from China. The US is Malaysia’s third biggest trading partner after Singapore.

The US is concerned over the increasing scale of migration from Iran to Malaysia and the growing economic ties between these two countries could strengthen Iran’s financial support for Hamas.

In March, police in Kuala Lumpur detained someone who they believe to be an Israeli spy on a mission to kill Hamas operatives in the country. In 2018, a Palestinian electrical engineering lecturer, who was also a Hamas member, was killed in Kuala Lumpur.

There are claims that about 200,000 Iranians are presently in Malaysia, some of whom have taken up residence, own businesses, or are tertiary students. Malaysia has a population of 33 million.

Malaysia does not see Hamas as a terrorist organization, but as a group that is fighting for the freedom of Palestine. This is what has determined its policy towards Iran.

Would Malaysia’s insistence on not wanting to play ball with the US be detrimental to the country? There is talk of “potential impacts” on Malaysia should it refuse to take a tougher stance against Iran, but it could range from low-key restrictions to high-level sanctions.

The latter is probably unlikely. The visit by the top US officials is probably a warning that matters could escalate should Malaysia persist in not adhering to US requests. If the US had sanctions in its mind, it would have declared them already.

There was an earlier “warning.” Last December, US imposed sanctions on four Malaysian-based companies, claiming they were helping in Iran’s production of drones. Iran has been accused of supplying deadly drones to “terrorist proxies” in the Middle East, and to Russia for use in Ukraine.

Malaysians, on the other hand, are divided over this issue, judging from the reactions on social media. Some feel Malaysia ought to stand up to the bully named US, and not let anything affect the country’s sovereignty.

Some fear that Malaysians will have to pay for the government’s stubbornness in insisting on supporting Hamas. They say that the US could penalize Malaysia by imposing restrictions on trade, investment, higher education, and travel, and all this could send the ringgit plummeting.

The one consolation is that Malaysia is among the US’ top 20 trading partners and Malaysia is a key Asean partner. It will also be the Asean chair next year.

There is likely to be some restrictions imposed on Malaysia by US.

*The views expressed in this article are those of the author and do not necessarily reflect the official editorial position of UCA News.

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