Saudi Arabia and United Arab Emirates: Gulf competition pushes oil prices to record highs

The problem emerged last week, when the UAE rejected a proposal to extend the agreement on production restrictions for eight months, which was submitted by Saudi Arabia and Russia on behalf of the alliance. OPEC Plus.

And the UAE wanted to renegotiate their own baseline, on which the question of whether to increase or decrease production is calculated, so that they are free to pump more oil.

But Saudi Arabia and Russia opposed the UAE’s will.

But negotiations took an unusual turn when the energy ministers of the UAE and Saudi Arabia stepped out and announced differences between the two allies.

Ben Kahl, a researcher at the Center for International and Strategic Studies in Washington, believes that “the dispute has been a surprise and that it may not be possible not to disclose it”.

“Abu Dhabi’s production capacity is not up to its share in OPEC,” Kahl said. “They are investing a lot of money to increase their production at a time of increasing demand, hence the UAE’s frustration during the production year.”

For years, the partnership between Saudi Arabia and the United Arab Emirates has mapped the geopolitics of the Arab world.

The personal relationship between the Crown Prince of Saudi Arabia, Muhammad bin Salman, and the Crown Prince of Abu Dhabi, Muhammad bin Zayed, has been a key element in solidifying the pillars of this alliance.

The two men are seen as the de facto rulers of their country, each with an ambitious vision. For many years, cooperation between them has deepened on many strategic issues, and they formed an Arab military alliance in 2015 to fight the Houthi armed movement loyal to Iran in Yemen, in addition to imposing a blockade. diplomatic and commercial in Qatar in 2017.

But the cracks in the body of that relationship started to become clear two years ago, when the UAE withdrew most of its forces from Yemen against the will of the Saudis.

And last January, the Emiratis reluctantly accepted a Saudi-led deal to end the blockade on Qatar, despite their utter mistrust of Doha.

Likewise, Saudi Arabia has shown no enthusiasm for the UAE’s decision to normalize relations with Israel last year.

But the divisions began to deepen last February, when Saudi Arabia issued an ultimatum to multinational companies that they had to move their regional headquarters to the kingdom by 2024 in order to avoid losing government contracts.

After the UAE rejected the draft OPEC Plus deal, Saudi Arabia – in what appeared to be a retaliatory response – suspended flights to the UAE, citing the outbreak of the Corona outbreak as the reason for this suspension. But the Saudi move coincided with the Islamic holidays that many generally look forward to spending in Dubai.

Saudi Arabia has also announced that it will exclude goods imported from free zones or linked to Israel from customs privileges under agreements with other Gulf countries, which is a blow to the economy of the Arab Emirates. united, which benefits from the free zone model.

There is growing economic competition behind the OPEC + conflict; The United Arab Emirates and Saudi Arabia are trying to diversify their economies by reducing their dependence on hydrocarbon exports.

Under the leadership of Mohammed bin Salman, Saudi Arabia is adopting a bolder economic strategy that has placed the Kingdom in competition with the United Arab Emirates in a number of sectors such as tourism, economic services and technology.

Saudi Arabia represents the giant of the region, which is now rising and worrying Emiratis on many levels, as described by Neil Quilliam, a researcher at Chatham House in London.

Quilliam believes that “within 15 to 20 years, if Saudi Arabia succeeds in transforming itself into a dynamic economy, it could pose a threat to the economic model of the United Arab Emirates”.

It is not yet clear whether Saudi Arabia and the UAE will be able to strike a new deal for the OPEC Plus alliance.

But Ali Shihabi, a Saudi analyst close to the royal court, doesn’t believe the current dispute will hamper the long-term partnership process, even though the Emirati’s hardening of the stance has been “shocking” to the Saudis – even if they sought consensus.

Al-Shihabi said, “In the past, the two sides have faced greater disagreements than the current ones … and every relationship has its ups and downs, including the relationship between the United States and the Great -Brittany, but the basis of this relationship is so solid. that it is difficult to do permanent damage to this alliance. ”