United Arab Emirates announces it’s leaving OPEC

A MARTÍNEZ, HOST:

The United Arab Emirates announced this morning that they are leaving OPEC. That’s the global oil cartel that governs production of the vital commodity. The UAE says the decision was based on meeting the market’s needs. NPR’s international correspondent Aya Batrawy joins us from Dubai to explain what all this means. I mean, Aya, the UAE has been an OPEC member for nearly 60 years. So why leave now?

AYA BATRAWY, BYLINE: Yeah, Abu Dhabi signed up in 1967. But it’s been dissatisfied with OPEC’s production quotas and its curbs on output for a while now. One clear example was back in the COVID-19 crisis, when the UAE said it believed that OPEC – which stands for the Organization of the Petroleum Exporting Countries – and its alliance with Russia, which is now known as OPEC+, needed to increase their production. And it called the quotas unfair.

Now, those quotas are there to keep oil prices from swinging too high or too low, ensuring that supply meets demand. But what we saw today was the UAE saying, that’s it. It’s leaving the group as of May 1 this Friday. Now, the UAE says this decision is based on its national interests and meeting the market’s needs.

MARTÍNEZ: Yeah, and it’s not easy to avoid the politics of leaving OPEC.

BATRAWY: Yeah. I mean, this is the clearest example yet of the UAE striking out on its own. And it comes as it’s had this major rift with its bigger neighbor, Saudi Arabia, which leads OPEC. Abu Dhabi and Riyadh had a fall out over the war in Yemen, which they had initially joined in together against the Houthis there. But Saudi Arabia four months ago publicly accused the UAE of threatening its national security by arming and supporting southern separatists in Yemen.

And it asked the UAE to leave Yemen in just 24 hours, and it did. And more recently, the UAE has been dissatisfied with the regional response to Iran’s attacks. It wanted a more muscular response. It’s borne the brunt of Iranian missile and drone attacks, some 2,500 of them.

MARTÍNEZ: All right, so a big move for the UAE. What does this mean for the rest of the region?

BATRAWY: So this is further disintegration of the ideals of unity and Pan-Arabism that led to the creation of the Arab League in Cairo 70 years ago. So it is possible the UAE could withdraw from regional or Pan-Islamic organizations as it continues to strike out on its own. Former Emirati government official Tareq Alotaiba, he wrote a think piece for the Arab Gulf States Institute in Washington. And he said Iran’s attacks not only tested the Gulf’s air defenses, but he says it exposed the hollowness of Arab solidarity. And he said it was primarily actually the U.S. and Israel, which provided military aid and intelligence sharing during the war. And this is what I have heard in meetings here, too, with officials, that the UAE, unlike Arab states, doesn’t see Israel as the main threat but Iran.

MARTÍNEZ: One more thing. Oil prices are trading at about $110 a barrel today. That’s nearly 60% higher than before the Iran war began. So what’s the UAE’s decision mean for that?

BATRAWY: Yeah, oil prices have surged because of the U.S.-Israeli war on Iran and Iran’s closure of the Strait of Hormuz. And that’s because there’s less supply from the Gulf. The UAE, for example, is producing just under 2 million barrels a day now. That’s about 40% than before the war. But analysts say the UAE’s decision will not have an immediate effect.

The London-based Capital Economics says that could actually happen later, when the Strait of Hormuz reopens. And that’s because the UAE has invested heavily in expanding its energy production capacity. It wants to be able to hit 4.8 million barrels a day. And it’s this kind of spare capacity that Rystad Energy says is a pillar of OPEC’s ability to manage markets. And it just lost that with the UAE’s exit.

MARTÍNEZ: That’s NPR’s Aya Batrawy in Dubai. Aya, thanks a lot.

BATRAWY: Thank you.

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