Jono Maryono
In a move that reverberates through the global energy landscape, the United Arab Emirates (UAE) has announced its withdrawal from the Organization of the Petroleum Exporting Countries (OPEC) after decades of membership. Citing a desire to pursue "national interests" and chart its own independent course, the UAE’s departure marks a significant development for the Vienna-based oil cartel, though observers suggest it is unlikely to lead to the organization’s dissolution. This decision stems from years of palpable dissatisfaction within the UAE regarding OPEC’s long-standing policy of production caps, a cornerstone strategy aimed at influencing global oil prices and stabilizing the market.
The UAE’s strategic pivot away from OPEC is underpinned by substantial domestic investments aimed at bolstering its oil production capabilities. The nation has committed billions of dollars to an ambitious plan to increase its output capacity from the current level of 3 million barrels per day (bpd) to 5 million bpd by 2027. As its production capacity has expanded, the UAE has increasingly voiced its demand for a larger production quota than what has been allocated under OPEC agreements. This internal ambition, now amplified by its exit, positions the UAE to potentially wield greater influence over its own resource management.
This significant policy shift occurs at a particularly volatile juncture for the global energy market, characterized by an ongoing energy crisis exacerbated by the recent escalation of conflict between the United States and Israel against Iran. The conflict, which commenced on February 28, has triggered retaliatory actions from Tehran, including strikes against Israeli targets, U.S. military assets, and critical infrastructure across Gulf nations. A key consequence has been the disruption of maritime traffic through the Strait of Hormuz, a vital chokepoint through which approximately 20 percent of the world’s oil and liquefied natural gas (LNG) supplies are transported from Gulf producers.
Prior to the commencement of hostilities, the UAE’s production capacity had already reached an impressive 4.8 million bpd. However, under the constraints of its OPEC agreement, its allowable production was capped at 3.2 million bpd. This disparity between potential output and allocated quota has been a persistent source of friction, culminating in the UAE’s decision to seek autonomy.
Immediate Market Impact and Strategic Workarounds
While the UAE’s departure from OPEC is a significant political and economic statement, experts generally agree that its immediate impact on the global oil market may be constrained. The current geopolitical climate, specifically Iran’s control over the Strait of Hormuz, presents a significant bottleneck for oil exports from the region, including those from the UAE.
However, the UAE has proactively developed alternative export routes to mitigate the impact of any potential chokepoint disruptions. The nation has leveraged the Fujairah terminal, strategically located on the Gulf of Oman, allowing it to bypass the Strait of Hormuz. Last year, this terminal facilitated the export of approximately 1.7 million bpd of crude oil and refined fuels. While this provides a crucial alternative, it has not been sufficient to fully realize the UAE’s burgeoning production ambitions.
The dynamics of the Strait of Hormuz remain a critical factor influencing the global energy supply. Any resolution to the current conflict that restores unimpeded navigation through the strait could dramatically alter the market landscape. Conversely, ongoing tensions, including the U.S. naval blockade of Iranian ports and Iran’s reciprocal restrictions on foreign-flagged vessels transiting the strait, contribute to market uncertainty. Furthermore, Iran has indicated a potential interest in maintaining leverage over the strait post-conflict through the imposition of tolls, a move that could introduce new complexities to global shipping.
Preparing for a Post-Fossil Fuel Era
The UAE’s strategic decision to exit OPEC appears to be a forward-looking move, anticipating a future characterized by evolving energy demands and a potential decline in oil consumption. Kingsmill Bond, an energy strategist at the think tank Ember Future, views the UAE’s decision as a shrewd maneuver. "They are clearly preparing for the period after the war," Bond stated, "because now that we have reached peak oil demand and we are entering a new environment – they want to be free from the constraints of OPEC."
Bond elaborates on the UAE’s long-term strategy: "The UAE is preparing for a world after the Iran war where oil demand is in decline, and OPEC’s power to maintain control and discipline will be weaker." This perspective suggests that Abu Dhabi’s strategy is to maximize its oil production and sales to capitalize on the remaining demand for fossil fuels before the global transition to cleaner energy sources gains further momentum. This approach stands in stark contrast to the stated objectives of some other OPEC members, such as Saudi Arabia, which have historically prioritized maintaining higher oil prices through production restraint to ensure long-term revenue stability.
Reactions and Geopolitical Undercurrents
Officials closely associated with Saudi Arabia have been quick to downplay the significance of the UAE’s departure. Mohammad al-Sabban, a former senior oil advisor to Saudi Arabia, commented to Al Jazeera, "It’s not a major blow, especially for OPEC+ [which] consists of 23 countries, and one country going out doesn’t mean anything." Al-Sabban suggested that the UAE’s decision was influenced by Western powers seeking to create divisions within the cartel, referencing historical U.S. criticism of OPEC’s price-setting influence. He asserted, "But this is nonsense because the UAE knows that OPEC adjusts production to maintain an equilibrium and nothing else."
Indeed, former U.S. President Donald Trump has been vocal in his criticism of OPEC, accusing the cartel of manipulating prices to the detriment of global consumers. However, al-Sabban’s assessment highlights a counterargument that OPEC’s primary function has been market stabilization rather than price gouging.
OPEC’s Resilience and Evolving Role
OPEC, a foundational organization established in 1960 by founding members Saudi Arabia, Kuwait, Iran, Iraq, and Venezuela, has demonstrated a notable capacity for adaptation throughout its history. The cartel has weathered numerous geopolitical storms and has seen member countries depart and rejoin over the years, including Qatar, Indonesia, Ecuador, and Angola.
Robin Mills, a non-resident fellow at Columbia University’s Center on Global Energy Policy and CEO of Qamar Energy in Dubai, posits that while OPEC’s influence may diminish, its existence will persist. "It will be less influential than before, but it won’t disappear," Mills stated.
The historical significance of OPEC was underscored in 1973 when its Arab members implemented an oil embargo against nations supporting Israel. This landmark collective action had profound global repercussions and marked the first instance of Arab states wielding oil as a political weapon.
In its early days, OPEC commanded a substantial share of the global oil market, accounting for half of all production. However, the global energy landscape has evolved significantly. The rise of major oil-producing nations such as the United States and Norway has diversified supply sources, reducing OPEC’s market share to approximately 33 percent. Furthermore, OPEC has expanded its reach through alliances with non-member oil-producing nations, forming the broader OPEC+ group, which now encompasses 23 countries from Latin America to Russia.
Despite the UAE’s exit, the continued benefits of collective action within the OPEC+ framework remain a compelling factor for many member states. Mills points out, "The ability to act collectively on managing the market and ensure that prices don’t go too high – and not too low – that was the reason to form OPEC+." This coordinated approach has proven effective in navigating market volatility during periods of crisis, including the 2014 oil price crash and the COVID-19 pandemic, where the group implemented unified responses to stabilize supply and demand.
A Deepening Regional Schism
Beyond the economic and strategic considerations related to oil markets, some analysts interpret the UAE’s departure from OPEC as a symptom of broader geopolitical realignments within the Gulf region. Anas Abdoun, an international consultant in energy and global affairs, writing for Al Jazeera, argues, "The UAE’s departure is, above all, the visible sign of a deep regional rupture between Riyadh and Abu Dhabi first, but beyond that, between two incompatible visions of what Gulf order should look like."
The UAE has found itself at the forefront of regional tensions, bearing the brunt of Iran’s retaliatory actions following joint U.S.-Israel strikes. Among Iran’s regional neighbors caught in the crossfire, the UAE has experienced a disproportionately high number of attacks, exceeding those against Israel and all other Gulf Cooperation Council (GCC) countries combined.
Throughout the ongoing conflict, which is currently in a precarious ceasefire, the UAE has privately advocated for more aggressive policies against Iran. While the UAE government has officially maintained a defensive stance, public figures and influencers within the Emirates have openly called for more assertive action. In contrast, Saudi Arabia, Qatar, and Oman have publicly supported a more diplomatic approach to resolving the crisis.
The UAE’s withdrawal from OPEC is the latest manifestation of Abu Dhabi’s increasingly independent foreign policy trajectory, which has seen it diverge from its regional counterparts on several key issues. Notably, the UAE was the first Arab nation to normalize ties with Israel through the Abraham Accords in 2020, a move that signaled a significant shift in regional alliances.
Gregory Gause III, an associate fellow at the Middle East Institute, suggested in a recent webinar that "the war might have exacerbated the differences that the Emirates felt." This sentiment underscores the idea that the current geopolitical climate has amplified existing divergences in strategic thinking and regional policy objectives among Gulf states.
Ultimately, Abdoun concludes that the "real loser" of the UAE’s decision to exit OPEC is "the idea of a collective capacity for Arab fuel-producing states to shape the global energy order." This perspective highlights the potential erosion of unified Arab influence on the international stage as key players pursue increasingly distinct national agendas. The UAE’s bold move signals a new era of independent energy strategy, the full implications of which will unfold in the coming years.
