Emirates want to go their own way in the Gulf

Why are the Emirates taking this step?

Iran’s retaliatory attacks have also targeted Dubai and Abu Dhabi. Tourism was hit in Dubai, and facilities belonging to the state oil company ADNOC burned in Abu Dhabi, which has 95 percent of the Emirates’ oil. The Emirates are considered the economic center of the Gulf and felt abandoned by their neighbors.

How has the price of oil developed since the UAE announced its withdrawal from OPEC?

On Wednesday, oil prices rose significantly by more than five percent. A barrel (159 liters) of Brent crude oil, the key type of crude oil in Europe, currently costs around 117 US dollars. Before the attack on Iran at the end of February, the price was between 70 and 75 dollars per barrel.

Shouldn’t the price of oil fall if the UAE becomes more independent and announces that it will produce more oil?

The expectation that oil and fuel prices will fall quickly because the Emirates want to supply more oil to the world market in the future will probably only be fulfilled in the medium to long term. What is crucial is that the twice-blocked Strait of Hormuz is reopened for the transport of crude oil all over the world. Around 20 percent of globally traded crude oil is transported through this bottleneck between Oman and Iran in peacetime. WIFO expert Josef Baumgartner says: “In the short term, leaving OPEC will have a very small effect. Because the Abu Dhabis cannot sell their oil at the moment. They have to produce in storage and the warehouses are already full.”

Why are the Emirates leaving OPEC now of all times? Isn’t this the worst possible time? No, on the contrary. The Abu Dhabis are taking advantage of the current high price jumps on the market and the political chaos in the Gulf and are not causing further disruption. They hope to be able to enter the world market with higher production volumes after the opening of the Strait of Hormuz – without lengthy debates in OPEC under the dominance of Saudi Arabia.

Instead of producing around 3.4 million barrels per day like in 2025, there should be five million in 2027. That’s many billions more in government revenue that Abu Dhabi wants to invest in reorganizing its economy (AI, renewable energy, etc.)

Asked whether his country had coordinated with Riyadh, UAE Energy Minister Suhail Mohamed al-Masrui said the issue had not been discussed with any other state. “This is a political decision that was made after a close examination of current and future funding policies,” said the minister.

Can Abu Dha’s calculations work out to come out of the crisis as a winner? WIFO expert Baumgartner is skeptical. Oil prices could also fall more than desired and Abu Dhabi could end up as a loser. An example: In 2020, the Saudis wanted to reduce subsidies for higher prices, but did not prevail against Russia. OPEC+’s production was increased at the same time as the corona pandemic occurred and with it a drastic price drop to up to $20 per barrel. The relevant US variety WTI even had a negative price for one day.

Are we witnessing the beginning of the end for OPEC?

Russia or Kazakhstan are not thinking about leaving OPEC+. Other countries are keeping a low profile. The withdrawal of the UAE definitely represents a weakening of OPEC, as its production volumes represent 16 percent of the total.

How did the rift between the UAE and Saudi Arabia arise?

The rivalry is not new, for example in tourism or oil production, where the Saudis call the shots in OPEC. Recently, however, the relationship has noticeably cooled down. Both support different forces in the civil wars in Yemen and Sudan. In 2020, the UAE established official relations with Israel (Abraham Accords) through US mediation; a Saudi rapprochement failed with the outbreak of the Gaza War. In the Iran war, the UAE, which has been hit harder economically, is pushing for joint counterattacks, but the Saudi royal family is refusing. The mediating state of Pakistan is also causing tensions: the UAE criticizes it as being too Iran-friendly, and Saudi Arabia has recently moved closer to Pakistan.

What does the USA have to do with it?

The USA has been producing more and more oil since the 2010s and has now become the largest oil producer in the world. As a non-OPEC member, they are therefore bothered by the great influence that the group can have on oil prices. Donald Trump has been criticizing OPEC as a “cartel” for years and has demanded that it increase oil production so that gasoline prices also fall for US citizens – an important political issue, especially shortly before the approaching midterm elections in November. The ruling family of the UAE, which is already close to the Trump family, is hoping that the exit from OPEC will lead to an even stronger bond with the USA.

Is there a connection to Austria?

An indirect one: Next to the Republic of Austria, Abu Dhabi is OMV’s second largest shareholder and most important partner. Recently, the founding of the chemical giant Borouge Group International, based in Vienna, was sealed between OMV and ADNOC, under the leadership of Sultan Al Jaber. Austria gets its oil primarily from Kazakhstan. It comes into the country via pipeline from Trieste.