Iran and Saudi Arabia have agreed to resume ties and reopen embassies in each other’s countries in a major diplomatic breakthrough.

A joint statement released Friday following talks hosted by China confirmed a 2001 security cooperation agreement and a 1998 economic pact between the two regional powers would now resume.

Critics of Netanyahu have claimed the deal is a "dangerous development" for Israel's attempts to constrain Iran's influence in the region.

Saudi Arabia broke off ties with Iran in 2016 after a dramatic escalation of tensions following the execution of a Shia cleric.

After Riyadh put Sheikh Nimr al-Nimr to death, protestors stormed the Saudi embassy in Tehran and set the building on fire.

Then Iranian president Hassan Rouhani said at the time: “I have no doubt that the Saudi government has damaged its image, more than before, among the countries in the world, in particular [among] Islamic countries, by this unIslamic act.”

Then Saudi foreign minister Adel al-Jubeir declared that Iranian representatives had been given 48 hours to leave the gulf state.

Riyadh would not allow Tehran to undermine his nation’s security, he added.

Iran’s Islamic Republic News Agency reported today that a joint statement had been inked between Tehran, Riyadh and the Chinese government. 

The agreement stressed, “respect for sovereignty and non-interference in the internal affairs of each other,” it claimed.

“The three countries also expressed firm resolve to make every effort to strengthen regional and international peace and security,” the news agency added.

Former Israeli prime minister Naftali Bennett said the agreement marked a failure of Netanyahu’s government to create a regional anti-Iranian coalition.

“The restoration of relations between the Saudis and Iran is a serious and dangerous development for Israel that represents an Iranian diplomatic victory,” he said on Friday.

“Countries in the world and region see Israel divided with a non-functional government, focused on serial self-destruction. And then those countries chose a side.”

Opposition leader Yair Lapid said the deal marked “a collapse of our regional defensive walls that we had been building against Iran.”

“This is what happens when you are focused on the judicial madness instead of doing the work against Iran and strengthening ties with US,” he added.

Likud MK Yuli Edelstein said the resumption of positive relations between Iran and Saudi Arabia was “very bad for Israel and the entire free world.”

He added: “The world does not stop while we are focused on power struggles and head-butting, especially not the worst of our enemies…

“The time has come to sit and speak and solve the arguments between us in order to reunite against the existential threat against us.”

The Iran/Saudi Arabia deal was negotiated by Ali Shamkhani, head of Iran’s Supreme National Security Council, and his Saudi counterpart Rear Admiral Mosaed bin Mohammad Al-Aiban.

China was represented by the Director of the Office of the Central Commission for Foreign Affairs and a member of the CPC Central Committee’s political bureau.