Matthew’s view
The UAE’s announcement that it will quit the Organization of Petroleum Exporting Countries — a group that it has been a member of since 1967 — is a blow to the cartel, which has struggled in recent years to maintain unity.
Certainly, in the short term, its announcement doesn’t really matter. With the Strait of Hormuz closed, Gulf oil producers can’t hit their production targets anyway. That’s why oil markets will likely shrug off the news and keep focused on stalled US-Iran negotiations.
But Abu Dhabi has long complained that OPEC unfairly held back its oil production, and longer term, the logic of maxing out crude sales when you can has increased now that the Gulf’s ability to export has been shown to be dependent on the whims of others. Alternative routes may be nice to have, but will be uneconomic and are probably at least a decade away from completion. The UAE already has one of the Gulf’s most diversified economies and has long been more preoccupied with trying to sell all its oil reserves, rather than manage prices.
But beyond the oil market implications, a deeper fault line is at play. The UAE’s move is the latest sign that it is no longer willing to go along with historic alliances it views as unnecessary purely for the sake of harmony.
That most notably impacts its relations with Saudi Arabia, which considers itself the leader of the Gulf countries and bristles at the UAE’s independence. The OPEC withdrawal announcement came as Gulf leaders gathered in Jeddah for a meeting to discuss regional security. UAE President Mohammed bin Zayed was notable for his absence. Skipping that meeting and quitting OPEC at the same time will be seen as a snub to Saudi’s de facto ruler, Crown Prince Mohammed bin Salman. There are hints that the UAE will make further breaks from multilateral bodies in coming weeks.
It’s the latest sign of a deep rift between the two following clashes over divergent policies and ambitions in Sudan and Yemen. Economically, both countries have also been increasingly competing over the same pool of travelers, businesses, and investors. Apparent regional unity as a result of the Iran war now looks to be gone.
And as the UAE pursues its own line of policymaking, the schism will only deepen.
Notable
- UAE leadership has discussed leaving OPEC for years because it has long been stuck with a quota that didn’t reflect its production capacity, and has clashed with Saudi Arabia over output, The Wall Street Journal reported in 2023.