The decision of the United Arab Emirates to leave OPEC, announced yesterday but effective from May 1, has shaken the oil market and the organization itself. Although not the first member to leave the group – preceded by Indonesia in 2016, Qatar in 2019, Ecuador in 2020, and Angola in 2023 – its exit is different from the others and will have far more significant consequences: the Emirates are a major producer, the third largest in OPEC, and have the resources to realize their economic and political ambitions.
THE DIVERGENCES BETWEEN THE EMIRATES AND SAUDI ARABIA
Essentially, the Emirates are leaving OPEC because they want to sell more oil and poorly tolerate the maximum production quota mechanism promoted by Saudi Arabia, which effectively leads the organization. Saudi Arabia, whose state budget depends on oil revenues, has an interest in keeping crude prices high through voluntary supply containment – its own and that of other group members – relative to demand levels: this is a policy that, according to Riyadh, serves to “balance” the market but effectively allows it to influence it to its advantage.
The Emirates would prefer to act differently. While the Saudis – and the Russians, together with whom they lead OPEC+, an informal extension of the cartel – prefer to keep crude prices around $100 per barrel even at the cost of producing less, Abu Dhabi would rather produce more, even at the cost of earning less per barrel sold.
THE CONSEQUENCES FOR OPEC
Behind the Emirates’ exit from the oil exporters’ cartel, therefore, lies this divergence of vision with Riyadh. “OPEC’s market power is destined to decline,” explained Greg Brew, analyst at Eurasia Group. “The exit of the United Arab Emirates will undermine the group’s credibility because the Emirates represented a significant share of OPEC’s overall capacity,” that is over 10 percent of total production.
According to Javier Blas, analyst at Bloomberg, the loss of the Emirates “represents the most severe existential crisis the group has ever faced since its founding, more than half a century ago.”
As soon as the crisis in the Persian Gulf subsides and the Strait of Hormuz reopens, the Emirates will effectively be an independent producer, a “lone wolf,” in the oil market. Consequently, OPEC will see its influence diminish, that is its ability to manage prices through timely regulation of output levels. Saudi Arabia was already struggling to ensure compliance with production quotas by all members: from now on it will probably have to rely on the cooperation of countries adhering to OPEC+, which as mentioned is an informal grouping and whose leadership is shared with Russia.
WHAT THE EMIRATES WILL DO NOW
For the moment, the Emirates’ exit from OPEC will not change much on the oil market: the Strait of Hormuz is closed due to the war between the United States and Iran and the Emirates can only partially bypass it through the Fujairah pipeline, which however has a limited capacity of 1.5 million barrels per day.
As soon as the conflict ends and the situation begins to return to normal, however, Abu Dhabi will start pumping more oil. The increase in crude supply on the market will be positive for consumers because it will reduce prices, but it is unclear how much the Emirates will be able to increase their output: in February they produced 3.6 million barrels per day, a level probably close to the maximum.
On the other hand, it should be noted that in recent years the country has invested billions in expanding production capacity, so it could – Blas thinks – manage to push to 4.5 million barrels, reaching up to 5 million by 2027.
According to George Cotton, analyst at J. Safra Sarasin, the Emirates “clearly see the current energy crisis as an opportunity to gain market share […]. The policymakers of the United Arab Emirates are signaling that oil markets will likely include new ‘higher risk premiums for a longer period.’ They believe the United Arab Emirates are well positioned to capture this value in the future.”
In his view, all this “also implies that diplomatic relations in the Gulf are becoming more fragile and multipolar. The nations of the region are discovering that their allies have broader geopolitical goals in mind and that they could end up becoming collateral damage.”
THE POLITICAL PROJECTION OF THE EMIRATES
Indeed, the contrast between Abu Dhabi and Riyadh on OPEC’s energy policy runs parallel to their interests in foreign policy.
The Emirates have heavily focused on deepening relations with the United States and Israel, also with a view to defense assistance, and have neglected relations with neighboring monarchies of the Persian Gulf. In this regard, the Emirates have often clashed diplomatically with Qatar (the Emirati opposition to the Muslim Brotherhood, a political organization based on Islamic fundamentalism, is involved) and with Saudi Arabia (they belong to two different camps in Yemen).
The Emirates withdrew their troops from Yemen in 2019 but have continued to support the Southern Transitional Council, a separatist group that according to Abu Dhabi constituted a bulwark against the Islah party, close to the Muslim Brotherhood. Also with a view to countering the Muslim Brotherhood, the Emirates have supported for years the regime of Egyptian President Abdel Fattah al-Sisi. Similarly, in Libya, the Emirates side with General Khalifa Haftar, who opposes the Tripoli government, the only one recognized by the international community but which hosts factions affiliated with the Muslim Brotherhood.
WHO WILL BE THE NEXT TO LEAVE OPEC?
The next country to leave OPEC could be Venezuela, which after the deposition of former President Nicolas Maduro has moved very close to the United States, which today effectively control its oil industry. Despite good relations with Saudi Arabia, American President Donald Trump has often heavily criticized OPEC’s energy policies, accusing the organization – since 2018 – of artificially keeping crude prices high through production cuts.
