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A few years ago, the United Arab Emirates and Saudi Arabia went so far as to secretly develop a plan for political union.
While a confederation did not materialize, the autocratic Gulf states fought rebels in Yemen and united in a boycott of Qatar for its alleged support for Islamism.
Over the past few days, however, cracks in this unity have become apparent as Riyadh and Abu Dhabi’s interests again diverge on issues ranging from oil production in Yemen, to normalization with Israel and how. manage the pandemic.
A videoconference meeting of OPEC members and allies (Opec +) ended in deadlock on Friday after Saudi Arabia and Russia asked producers to increase production in the coming months. The request was aimed at easing the rise in oil prices and extending an existing supply agreement to ensure stability as the world engages in a fragile recovery from the coronavirus pandemic.
But the United Arab Emirates refused, grappling with an issue of their own production quota which they deem unfair. OPEC members meet again on Monday.
“The increased competition within the Gulf states concerns a number of economic policy issues,” said Karen Young, senior researcher at the Middle East Institute. “Saudi Arabia has clearly increased the pressure as the UAE strives to meet its own profit targets in this tight market. These energy giants are gearing up for the next ten years of revenue from export to support their political economies. ”
Other OPEC + countries agree to plan to increase production by 400,000 barrels per day each August through December and extend the deal beyond its scheduled end date in April 2022.
A deteriorating relationship between Saudi Arabia and the Emirates has combined with the UAE’s determination to increase production capacity to support oil diversification plans. The power struggle between OPEC members now threatens the cartel’s ability to unify in the longer term and to ensure stable oil prices.
In a rare public intervention on Sunday, the UAE’s energy ministry said it supported an increase in production, but called for the country’s benchmark production – from which its supply cuts are calculated – take into account its higher production capacities and be reviewed to ensure fairness “for all parties”.
Abu Dhabi’s firm stance vis-à-vis Opec comes amid a wider diversion of interests between the two Gulf superpowers.
While the United Arab Emirates and Saudi Arabia have formed a “reservoir of strategic alignment” over the past decade, “economic competition is intensifying among the Gulf states,” said Marwan Alblooshi, Emirati doctoral student at the University of Edinburgh.
In 2019, the UAE withdrew most of its military forces from Yemen, leaving Saudi Arabia alone in its battle against Iran-backed Houthi rebels. Southern separatist forces allied with the UAE then clashed with Saudi-backed Yemeni government forces.
As the UAE accepted a Saudi-led effort to end the trade and travel embargo imposed on Qatar, Abu Dhabi expressed alarm at the speed of reconciliation with Doha. Likewise, the UAE’s accession to Israel following the normalization of relations last year raised Saudi Arabia’s eyebrows.
Different handling of the pandemic has also been a source of frustration in both states. Riyadh decided on Sunday to ban travel to and from the United Arab Emirates, where the Delta variant accounts for a third of all new cases. Saudi Arabia has not approved the vaccine produced in China on which the UAE relies heavily for its mass vaccination.
Saudi Arabia’s threat to cut multinationals off lucrative government contracts if they don’t move their headquarters to Riyadh has been seen as an implicit attack on Dubai, the UAE’s commercial hub where most are based.
The Saudis play down discussions of the tensions, stressing that the OPEC feuds are “business” and that the coronavirus restrictions are about “security”, not politics.
“Over the past 40 years, the UAE has consistently followed the Saudi OPEC example,” said Abdulkhaleq Abdulla, a Dubai-based political science professor. “But lately the UAE has been more adamant about its fair quota and is now showing its muscles on that front.”
Under the proposed Opec + deal, the UAE would proportionally reduce production by 18%, compared to a 5% cut for the kingdom and a 5% increase for Russia. The UAE said it has shut down around 35% of its current production capacity, compared to an average of around 22% for other parts of the deal.
The UAE had requested that the benchmark production references be considered at a subsequent meeting. The request was denied.
“The joint ministerial follow-up committee (of OPEC) has unfortunately proposed only one option, that of increasing production on the condition of an extension of the current agreement, which would prolong the unfair production reference UAE benchmark until December 2022, ”the UAE Department of Energy said. in a report.
Amrita Sen of the consultancy firm Energy Aspects said: “The growing differences of opinion on foreign, economic and security policies between Riyadh and Abu Dhabi, as well as on oil policy itself, will complicate future discussions of the Opec and efforts to support the Opec + agreement ”.
Insiders say debate rages in Abu Dhabi at the top level of the national oil company over whether to quit the oil cartel. A departure would allow the UAE to fund plans to diversify the economy – from the production of refineries and petrochemicals to a newly formed commodities exchange and its own benchmark of crude that requires access to volumes to grow. make it a success.
The UAE’s departure from the cartel could trigger free production that undermines the goal of Opec +, energy analysts have said.
“The UAE has sacrificed the most,” UAE Energy Minister Suhail Al Mazrouei told CNBC on Sunday. “We cannot make a new deal on the same terms – we have the sovereign right to negotiate this.”
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