Denying that it wants to withdraw from OPEC, why is the UAE at odds with Saudi Arabia again?

Reporter | Anjing

Since 2019, the UAE's contradictions with its "hardcore" ally Saudi Arabia have become increasingly apparent, due to differences over issues in the Middle East, oil production, and competition for economic diversification and international influence.

In August 2019, UAE airstrikes against "friendly Yemeni government forces." The UAE is a member of the Saudi-led coalition that has been assisting the Yemeni government in its fight against Iranian-backed Houthis.

In July 2021, OPEC+ was forced to cancel a ministerial meeting after the UAE refused to accept an extension of the production cut agreement. The turmoil is also seen as the most obvious rift between the UAE and Saudi Arabia in recent years.

On Friday, the US media quoted Gulf countries and UAE officials as breaking the news, saying that the UAE is considering withdrawing from OPEC due to deepening differences with Saudi Arabia on Yemen, oil production and other issues.

As soon as the news came out, Brent crude futures fell as much as 2.8% to below $83 per barrel, and WTI crude fell 2.9%. Later in the day, UAE officials, speaking on condition of anonymity, quickly extinguished the fire, saying the UAE did not plan to withdraw from OPEC. International oil prices subsequently rose again.

This week, Saudi officials came forward again, emphasizing that Saudi Arabia's alliance with the UAE is very strong. But from last week to now, the UAE official has not publicly expressed its position on the turmoil.

Crude oil production

Saudi Foreign Minister Faisal said in an interview with the media on March 7 that the UAE wants to withdraw from OPEC that all decisions of OPEC and OPEC+ were made after in-depth discussions with all members, and the statement issued by OPEC+ reflects the consensus of all members.

After the start of the Russian-Ukrainian conflict last year, US President Joe Biden has been trying to persuade Saudi Arabia to increase OPEC+ production to stabilize international oil prices and assist the United States in reducing oil prices before the midterm elections. To this end, Biden also resisted domestic criticism and went to Saudi Arabia for the first interview with Saudi Crown Prince Mohammed bin Salman.

After Biden's visit, OPEC+, led by Saudi Arabia and Russia, only agreed to a symbolic increase of 100,000 barrels per day in September. International oil prices soared in October, a month before the US midterm elections, when OPEC+ announced 2 million b/d production cuts in November and December, the organization's biggest cut since the early days of the pandemic.

The move angered the United States, accusing Saudi Arabia of helping Russia and threatening to retaliate against Saudi Arabia on issues such as arms sales. Saudi Arabia stressed that the decision to cut production was purely economic, and the decision was negotiated with the United States before making the decision.

OPEC+ production cuts have continued to this day, with Russia announcing a 500,000 b/d cut in March in retaliation for Western oil price caps. OPEC+ is clear that it will not act to make up for the gap caused by Russia's production cuts.

But this series of actions is not in line with the UAE's plans.

The UAE has always wanted to increase oil production and diversify its economy by expanding oil revenues before the global energy transition is completed. Like Saudi Arabia, the UAE has set its own Vision 2030, which aims to wean itself off the oil economy and boost other industries.

The UAE is OPEC's third-largest producer, after Saudi Arabia and Iraq, and is one of the few OPEC countries with large spare capacity. In January, the UAE produced 3.23 million b/d of crude oil, compared to the country's existing capacity of 4.12 million b/d, according to the International Energy Agency (IEA).

With crude oil production well below capacity, the UAE also plans to expand capacity further, aiming to increase capacity to 5 million b/d by 2027. The UAE has long expressed dissatisfaction with OPEC's restrictions on the country's crude oil production.

In 2021, the UAE "fell out" with Saudi Arabia because of its opposition to extending production cuts, precisely because it was dissatisfied with its low base daily output in OPEC+. After differences between the two countries led to the cancellation of the OPEC+ ministerial meeting, Saudi Arabia agreed to raise the UAE's base daily production ceiling to 3.5 million barrels starting in May 2022.

The Wall Street Journal on Friday, citing US officials, broke the news that the UAE was also dissatisfied with OPEC+'s decision to cut production in October last year.

U.S. officials said the UAE ostensibly supported OPEC+'s decision to cut production, but the country's officials privately told the U.S. that it was willing to increase crude production. The UAE's move was also firmly opposed by Saudi Arabia.

Gulf energy officials also revealed that since October last year, the UAE has been privately trying to promote OPEC+ production increases, believing that Saudi Arabia's decision to cut production is contrary to the UAE's national interests. Anonymous UAE officials also said that due to perennial restrictions on crude oil production, there was a debate within the UAE hierarchy about whether to withdraw from OPEC.

Yemen question

In addition to oil production, the UAE and Saudi Arabia are at odds over their positions on Yemen, Qatar, Libya, Turkey and relations with Iran.

On Yemen, although the UAE joined the Saudi-led coalition in the war in 2015, the country withdrew its troops in Yemen in the fall of 2019. The withdrawal of the UAE also caused dissatisfaction in Saudi Arabia, which was the second main force of the coalition at the time.

Even when fighting in Yemen, the UAE's position and interests are different from those of Saudi Arabia.

While coalition forces have assisted the Yemeni government in the fight, the UAE has been dissatisfied with Islamist Islah, the backbone of Yemen's Hadi government. The party is seen by the UAE as an offshoot of the Muslim Brotherhood, which is a thorn in the UAE's side. UAE President Mohammed sees the Brotherhood as a mortal threat to the country's regime.

In addition to this, although Saudi Arabia shares a border with Yemen, the UAE does not border the country, and the Houthis do not directly threaten the UAE's national security. Joining the war in Yemen would allow the UAE to extend its influence to the Gulf of Aden and the southern tip of the Red Sea, ensuring smooth oil shipping lanes from the Persian Gulf to the Suez Canal.

While fighting in Yemen, the UAE bypassed the Yemeni government and sent troops to Socotra Island at the mouth of the Gulf of Aden. After landing on the island, the UAE army occupied key facilities such as airports, ports, government buildings, etc., and also planned to build a military base on the island. Finally, with Saudi mediation, the UAE troops withdrew from the island.

The Wall Street Journal report quoted Gulf officials as saying that although the UAE withdrew from the Yemeni battlefield, the country does not want to be excluded from the situation in Yemen, but wants to maintain influence along Yemen's southern coast to ensure control of oil shipping lanes.

But last year, Saudi Arabia began private direct talks with the Houthis to end the war in Yemen. Western officials revealed that to ensure influence over the situation in Yemen, the UAE signed a security agreement with the Yemeni government in December.

Under the agreement, the Yemeni government agreed that UAE troops could enter Yemen to assist government forces in the event of an imminent threat to the country. In addition, the UAE is seeking to build a military base on the southern tip of the Red Sea, on the island of the Bab el-Mandeb Strait between Yemen and Djibouti.

Gulf officials say Saudi Arabia privately opposes the UAE's security deal with Yemen and plans for a military base. To deter the UAE, Saudi Arabia sent Sudanese troops from the coalition to the area near the islands in the Bab el-Mandeb Strait.

Officials who leaked the information said it was deepening divisions over Yemen that led to increased friction between the UAE and Saudi Arabia. In January, the Saudi crown prince was absent from the Middle East summit hosted by the United Arab Emirates; In December, the UAE president did not attend the China-Arab summit hosted by Saudi Arabia.

Other officials said that in an effort to ease relations between the two countries, Sheikh Tahnoun bin Zayed al Nahyan, the UAE's national security adviser, traveled to Saudi Arabia several times to meet with the Saudi crown prince, but the talks were fruitless.

Saudi Foreign Minister Faisal denied in an interview this week that the rift between the UAE and Saudi Arabia was deepened.

He stressed that Saudi Arabia has a very deep and strong partnership with the UAE. While the two countries do not agree on all issues, the "overly dramatic" reports based on anonymous sources do not understand the depth of the relationship.

Regarding the OPEC+ production agreement, Faisal reiterated the Saudi energy minister's previous statement, saying that the market does not need any production changes until the end of the year.