By Massimo Calabresi
April 2, 2015

Forty-Eight hours before exhausted American and Iranian negotiators blew past their self-imposed March 31 deadline for nuclear talks, White House Middle East experts were working the phones to handle Tehran’s latest moves. But the calls had little to do with the sluggish negotiations on the shores of Lake Geneva.

On the sun-blasted tip of the Arabian Peninsula, Iranian-backed Houthi rebels were closing in on the strategic port city of Aden in southern Yemen, and the U.S. was scrambling to provide intelligence and logistical support to the Saudi Arabian forces trying to drive them back. At the same time, 1,500 miles (2,400 km) to the north in Iraq, the Americans and Iranians were on the same side–yet arguing over whether a U.S. air strike had killed two Iranian advisers guiding an Iraqi militia force against the Islamic State of Iraq and Greater Syria (ISIS).

For more than a decade, the U.S. and its regional allies have sought a resolution to the Iranian nuclear issue, and in recent weeks the ongoing talks in Switzerland have absorbed much of the world’s attention. After missing their initial deadline, the negotiators grappled to put on paper the progress they had made in hopes of finalizing the details of an agreement by June 30. But the revolutions of the Arab Spring and the chaos they have unleashed across the region since they started in 2010 place the nuclear talks and their eventual outcome in a more urgent context. The post–Arab Spring violence has now devolved into a region-wide proxy war, with Saudi Arabia and Iran, two of the region’s biggest powers and fiercest enemies, squaring off in a new, bloody conflict. The U.S. is caught in the cross fire of a rivalry that may intensify no matter what the end result of the nuclear talks.

In Syria, more than 220,000 people have already died as a brutal mix of al-Qaeda allies and other Sunni extremist forces–some armed and funded by Saudi Arabia–have sought to overthrow Iran-backed dictator Bashar Assad. In Iraq, Iran has exploited the collapse of central authority that followed the final withdrawal of U.S. troops in December 2011 to deploy more proxy militias and push its influence to Saudi Arabia’s northern border. Most recently, in Yemen, Iranian-backed Houthi rebels toppled the U.S.-friendly regime and have steadily advanced toward the strategic ports in the south, prompting the Saudis to lead a 10-nation-coalition counterstrike on March 25.

The U.S. is Saudi Arabia’s natural ally in this fight. Since Iran’s Shi’ite clerics established a theocracy following the 1979 revolution, Iran has been America’s No. 1 enemy in the region. But the interests of Washington and Riyadh don’t neatly overlap either. The list of places the Saudis want American military help–in Yemen, Syria, Iraq and beyond–is growing well beyond President Obama’s willingness to respond. And some, including Obama himself, see potential benefits in greater rapprochement with Iran, especially if the U.S.-Iran nuclear talks are ultimately successful. In December, Obama told National Public Radio that if Iran could get past its nuclear issues and stop destabilizing its neighbors, “it would be a very successful regional power.”

America’s allies in the region weigh such comments against Obama’s reticence to give full support to the Saudis militarily and worry that Washington is shifting away from them. Administration officials say the chance the U.S. will turn its back on its traditional allies in favor of Iran is “exactly zero.” They say Obama has tasked an ad hoc group at the White House and in the State and Defense departments to prepare an explanation of how he views the region in the wake of a successful nuclear deal, and to reassure allies that the U.S. remains committed to them. Possible measures range all the way from boosting military assistance to extending nuclear protection to Iran’s enemies.

At the same time, the Administration believes that Iran’s growing regional power is a fact and that there can be no resolution to the spreading proxy conflicts without Iran’s participation on one level or another. The Islamic Republic can’t simply be ignored. The Administration is ready “to see if Iran is willing to play a more productive role” in resolving conflicts in Syria, Yemen and other hot spots, a senior official involved in the effort tells TIME. If so, the official says, “there may be business to be done with Tehran.”

Whatever the ultimate outcome of U.S.-Iran nuclear talks, Obama’s decision on how to manage the spreading Saudi–Iran proxy war may be the most important he will make in his remaining years as President. Having won the Nobel Peace Prize in his first year largely thanks to his push for reconciliation in the region, he is in danger of leaving it a bloody mess.

Reaching Out

Last October, on the eve of a previous deadline for nuclear talks, Obama sent a secret letter to Ayatullah Ali Khamenei, the Supreme Leader of Iran. In it, Obama told Khamenei that the U.S. intended to go after ISIS in Iraq and Syria and that Iran should not interfere. But Obama also said the U.S. goal was not to deny Iran a role in the region or in Iraq. The second part of the letter, which was first reported by the Wall Street Journal, was widely seen as a potential offer to Iran by Obama. If the U.S. and Iran could get past their nuclear disagreements, which were then coming to a head, perhaps the two countries could engage in greater cooperation elsewhere.

Administration officials decline to confirm the existence of the letter, and a senior official says Obama never linked the nuclear deal to the question of Iran’s role in the region. But it was not the first time Obama seemed to suggest that if Iran and the U.S. could solve the nuclear question, there might be other good things in store for Tehran. In his address to the Muslim world in Cairo in 2009, Obama called on Iran to get right with the world through nuclear talks and said if they did, “my country is prepared to move forward.” The question for the ayatullahs, Obama said, “is not what Iran is against, but rather what future it wants to build.”

U.S. allies like Saudi Arabia and Israel say they are more than familiar with the kind of region Iran wants to build. On Nov. 9, just a few days before a round of nuclear negotiations in Muscat, Khamenei tweeted, “Why should and how can #Israel be eliminated? Ayatollah Khamenei’s answer to 9 key questions.” In 2013 the State Department found that terrorist operations by Hizballah, the Iranian-backed militia now in control of much of Lebanon and a key ally of Assad in Syria, were at the highest tempo since the 1990s. In 2011 an agent of Iran’s elite Qods force was indicted in a plot to assassinate the Saudi ambassador to the U. S.

That plot was yet another manifestation of the historic Saudi-Iranian enmity. The Saudis, as custodians of the two holiest sites in Islam and leaders of its Sunni branch, consider themselves the religion’s leaders. Iranians see themselves as the leaders of the Shi’ite branch and are fiercely proud of their ancient Persian culture. Saudi chauvinists view the Iranians as apostate hegemons, seeking to destabilize what remains of the Middle Eastern order. Iranian chauvinists view the Saudis as oil-rich, culturally poor and weak on the battlefield.

Since the 1979 revolution in Iran, that antipathy has played out with occasional spasms of violence across the region. Lebanon’s civil war ended only when Iranian-backed proxies agreed to a peace deal brokered in part by Saudi Arabia, leaving Iran’s ally, Hizballah, in charge of much of the country. The U.S. invasion of Iraq laid the groundwork for Iran to expand its regional influence, much to Saudi Arabia’s dismay. Even before the fall of Saddam Hussein–whose government was dominated by Iraq’s Sunni minority–uniformed Shi’ite militias began arriving in columns of buses from Iran. The new Shi’ite-dominated government in Baghdad became increasingly close with Tehran, alienating Iraq’s Sunnis and opening the door for the lightning advance of ISIS last year. Many Iraqi Sunnis preferred the extremist Sunni group to their own pro-Iran government.

That sectarian divide–and the Saudi-Iranian proxy war that has accompanied it–has widened in the years that have followed the Arab Spring. As countries rose up against their authoritarian leaders and central governments collapsed, populations fragmented along Sunni-Shi’ite lines. Nowhere has the result been bloodier than in Syria, where Iran is bolstering its longtime ally Assad against predominantly Sunni Arab states that are providing weapons and support to the Syrian rebels. Next door in Iraq, Iran and the U.S. are uncomfortably fighting side by side in a tacit alliance, while both forces launch attacks to oust ISIS from the north of the country. The deaths of the two Iranians allegedly killed in the U.S. strike in Tikrit have shown the dangers of the arrangement.

Direct Engagement

If the Saudis were satisfied working through proxies elsewhere in the region, the collapse in Yemen and the rapid rise of the Houthi fighters finally roused them to take action themselves. In late January, the Iranian-backed Houthis ousted the U.S.-backed government of President Abdel Rabbo Mansour Hadi and soon took control of the Yemeni government. In response, the Saudis have mustered a substantial fighting force, including at least 100 fighter jets and 150,000 troops, or more than half of its entire military. Riyadh also rallied at least nine other countries, including Egypt, the United Arab Emirates, Qatar, Kuwait and Jordan, among others, to join the fight. On March 30, Egyptian warships shelled Houthi forces near the southern city of Aden. The U.S. is providing intelligence and logistics support for the operations from regional bases and on March 26 rescued a pair of Saudi pilots who bailed out of their F-15.

The Saudis’ show of strength is impressive, but its ultimate purpose is uncertain–and so are the chances they’ll prevail over the Houthis, who have continued their advance on Aden and on April 1 entered the heart of the city. “I don’t currently know the specific goals and objectives of the Saudi campaign,” Army General Lloyd Austin, chief of the Central Command, told Congress on March 26. “I would have to know that to be able to assess the likelihood of success.”

The rising violence in the region has cast a long shadow over the Obama Administration’s attempts to get a deal on Iran’s nuclear program. The Saudis and other Sunni regional players suspect Obama’s eagerness for a deal is behind his reticence to confront Iran’s regional ambitions, but the Administration insists it’s the other way around. “We are seeking a nuclear deal precisely because Iran is a threat to the region,” says one senior Administration official involved in the effort to contain Iran.

Either way, the Saudi-Iran conflict is proving dangerous for U.S. interests even outside the Middle East. The ISIS threat beyond the borders of Iraq and Syria has at times been overstated, but the longer ISIS has the chance to flourish in the proxy war between Saudi Arabia and Iran in Syria, the more dangerous it may become. And the fear of foreign fighters bringing jihad home when they return or inspiring lone-wolf attacks has proved real enough in Europe, where terrorist attacks in Brussels, Paris and Copenhagen have all been linked, at least ideologically, to ISIS.

More worrying for Administration counterterrorism officials is the danger from al-Qaeda in the Arabian Peninsula (AQAP), the franchise of Osama bin Laden’s group that has been most aggressive in targeting the U.S. AQAP sent the Nigerian Umar Farouk Abdulmutallab on an unsuccessful mission to blow up a Detroit-bound airliner in 2009 and was responsible for the printer-cartridge bombs that U.K. and Dubai officials intercepted on U.S.-bound cargo planes less than a year later. The Houthis also oppose AQAP, but the U.S. chose to back the Saudi effort.

“Under no circumstances is the Administration going to abandon our allies,” says one senior Administration official. But it’s also impossible to see a diplomatic solution to the crises in Yemen and Syria without Iranian participation, the Administration officials believe. At the U.N. General Assembly last fall, Obama called for regional powers to work together for peace in Syria. U.S. officials say they are considering convening a peace conference on Syria that would include Iran and Saudi Arabia.

For now, the conflicts in Syria, Yemen and Iraq are only getting worse, and the prospects for diplomacy appear to be diminishing, not improving. But the Saudis and Iranians themselves reportedly engaged in secret talks in May 2014 to set up a mechanism to resolve their differences diplomatically. “The only way the region calms down is if the Saudis and the Iranians reach some kind of understanding,” says one senior Administration official. If the marathon talks at Lausanne show anything, it’s that it is possible for enemies to talk even as their allies wage war on the battlefields of the Middle East.

–WITH REPORTING BY JARED MALSIN/CAIRO; NOAH RAYMAN AND KARL VICK/NEW YORK CITY; KAY ARMIN SERJOIE/TEHRAN; AND MARK THOMPSON/WASHINGTON

Contact us at editors@time.com.

This appears in the April 13, 2015 issue of TIME.

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