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The United Arab Emirates said on Tuesday that it was leaving Opec after almost 60 years, dealing a significant blow to the oil cartel and its de facto leader Saudi Arabia.
The dramatic move by the Gulf state, Opec’s third-largest producer, underlines its long-running frustrations with the group of oil exporters over production quotas and its simmering tensions with Saudi Arabia.
It comes as the world is grappling with its biggest energy crisis in decades, triggered by the US-Israeli war against Iran and the Islamic republic’s closure of the Strait of Hormuz, through which about a fifth of the world’s oil normally passes.
The UAE, which was producing 3.4mn barrels of oil a day before the war, has for several years expressed its frustrations with Opec and been annoyed by the cartel’s production quotas, which have prevented it exporting greater quantities of oil.
“The Emirates were not happy to have to constrain themselves, particularly when they wanted to pump more and the Saudis wanted to pump less,” said Firas Maksad, director of Middle East at Eurasia Group. “Some of the political differences have been amplified because of different positions on the war in reaction to the Iranian threat, with the UAE doubling down on the US and Israel, while others are diversifying and hedging.”
While all the Gulf states were shocked and angered by Iran’s relentless missile and drone attacks on their territory, the UAE arguably pursued the most hawkish line towards the Islamic republic.
The view in Abu Dhabi is that the conflict revealed which partners could be relied upon and which could not as the Gulf state endured relentless Iranian missile and drone attacks.
The UAE also said it would be leaving Opec+, which includes Russia — signalling Abu Dhabi’s frustration with Moscow’s support for Iran during the conflict.
The UAE’s energy minister Suhail al-Mazrouei told the FT the move was a “sovereign national decision grounded on the UAE’s long-term strategic and economic vision and evolving energy profile”.
“We’ve been active with the group and we’ve been supporting all of the decisions of the group, but it’s a time where we need to look at the future,” he added. “The timing in our view is right because it has a minimum impact on all of the producers.”
The impact of the UAE’s move will not be clear until the Strait of Hormuz is fully reopened and the region is able to ship oil and gas normally. The Gulf state is currently exporting about half of its normal volumes because the chokepoint is closed.
But Jorge León, head of geopolitical analysis at Rystad Energy and a former Opec employee, said the cartel would be “structurally weaker” without the UAE as Saudi Arabia was the only remaining member with any spare production capacity.
Oil markets could become more volatile as Opec’s capacity to smooth supply imbalances diminishes, León said. The UAE produces about 12 per cent of Opec’s total output.
The UAE had previously raised the spectre of pulling out of Opec and been at loggerheads with Saudi Arabia over quotas on production for several years.
Analysts say the war has accelerated dynamics that existed beforehand. The UAE has long held the view that it should export at maximum levels to monetise the commodity, fund its next stage of development and prepare for a post-oil order.
But Opec, with Saudi Arabia as its de facto leader, imposed production quotas in a bid to prop up oil prices, restricting the UAE’s output. Riyadh requires far higher prices — close to $100 a barrel — to balance its books than wealthier Abu Dhabi.
Abu Dhabi’s relations with Riyadh deteriorated markedly when tensions between the two Gulf powerhouses burst into the open in December and January in a dispute over their support for rival factions in Yemen.
The rift appeared to ease as Gulf states were unified in their anger at Iran’s aggression against its Arab neighbours. But the tensions have resurfaced as the war exacerbated Emirati frustrations with some multilateral and regional institutions.
The Gulf state has borne the brunt of Iran’s retaliatory attacks, with the Islamic republic firing more than 2,000 missiles and drones at the UAE. Abu Dhabi has openly criticised what it considers the weak response of Arab and Muslim states.
That has led to speculation that the UAE could freeze its membership of the Arab League and the Gulf Co-operation Council.
It announced its decision to leave Opec as leaders of the GCC — which includes the UAE, Saudi Arabia, Qatar, Kuwait, Oman and Bahrain — were meeting in Jeddah to discuss the Iran war.
“After going through the 40 days of bombardment, there will be a lot of rethinking. There have already been meetings about what happens next,” said Abdulkhaleq Abdulla, an Emirati academic and commentator.
“There’s been thinking about who really stood by us, and who didn’t, regionally and globally, and we really need to strengthen relations with those who came publicly to our help.”