The announcement by Iran and Saudi Arabia that they are re-establishing diplomatic ties could lead to a major realignment in the Middle East. It also represents a geopolitical challenge for the United States and a victory for China, which brokered the talks between the two longstanding rivals. Under the agreement announced on Friday, Iran and Saudi Arabia will patch up a seven-year split by reviving a security cooperation pact, reopening embassies in each other’s countries within two months, and resuming trade, investment and cultural accords. But the rivalry between the…